• Net Income: $299 million or $2.14 per diluted share for Q3 2024.
• Average Loan Growth: Increased by 1% quarter over quarter.
• Average Deposit Growth: Increased by 3% quarter over quarter to $61.7 billion.
• Net Interest Income: $573 million, a $20 million increase from the second quarter.
• Net Interest Margin: 3.24%, a decline of three basis points from the prior quarter.
• Fee Income: Record level of $81 million, up 6% quarter over quarter.
• Provision for Credit Losses: Increased by $5 million to $42 million.
• Net Charge Offs: $29 million or 22 basis points annualized.
• Nonperforming Assets: Fell by 1 basis point to 26 basis points of total assets.
• Allowance for Credit Losses: $696 million or 1.31% of total loans.
• Common Equity Tier 1 Capital Ratio: 14.1%.
• Tangible Common Equity Ratio: 9.7%.

Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• East West Bancorp Inc (NASDAQ:EWBC) reported a strong third-quarter net income of $299 million, or $2.14 per diluted share.
• The company achieved a 3% quarter-over-quarter growth in average deposits, reaching a record $61.7 billion.
• Net interest income increased by $20 million, or 4%, from the second quarter, driven by higher income from loans.
• The company reported a record fee income level of $81 million, up 6% quarter over quarter, driven by strong syndications activity and commercial cash management solutions.
• East West Bancorp Inc (NASDAQ:EWBC) improved its credit quality metrics, with nonperforming assets falling to 26 basis points of total assets.

Negative Points

• The net interest margin declined by three basis points to 3.24% from the prior quarter, partially due to Fed rate cuts.
• Provision for credit losses increased by $5 million from the second quarter to $42 million.
• The special mention loans ratio rose slightly to 0.88%, indicating some increase in potential credit risk.
• Despite strong deposit growth, the company experienced slower loan growth than desired, with only a 1% increase in average loans quarter over quarter.
• East West Bancorp Inc (NASDAQ:EWBC) faces challenges in maintaining its net interest income levels due to potential further rate cuts by the Fed.

Q & A Highlights

Q: Can you explain the rationale behind the faster deposit growth compared to loans? Are you aiming for a lower loan-to-deposit ratio? A: Christopher Del Moral-Niles, CFO: The faster deposit growth provides us with more flexibility. We have lowered deposit pricing and still benefited from net inflows, which helps optimize our liability profile moving forward.

Q: The guidance implies a slight decline in net interest income (NII) from Q3 levels. Is this due to lower rates, and how do you expect NIM and NII to trend? A: Christopher Del Moral-Niles, CFO: We feel good about Q4 dynamics. Swaps maturing in Q1 will have a positive effect, potentially adding over $10 million to the numbers.

Q: With capital ratios growing, what are your updated thoughts on buybacks? A: Christopher Del Moral-Niles, CFO: We are targeting a TCE ratio around 9.49%. We remain patient and opportunistic in our capital approach, focusing on optimizing the balance sheet.

Q: How do you plan to manage liquidity, especially with cash and securities? A: Christopher Del Moral-Niles, CFO: We are disciplined with deposit pricing, which may lead to runoff of higher-cost deposits. We are also thoughtful about the mix of fixed versus floating securities, optimizing our portfolio with $400 million to $600 million of churn each quarter.

Q: What are your thoughts on loan growth post-elections, and do you expect to return to high single-digit growth? A: Dominic Ng, CEO: We have the capital flexibility to meet client demands. Loan growth depends on economic conditions and customer confidence. We continue to add new customers, but existing customer drawdowns depend on economic clarity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.