EAST WEST BANCORP INC Q4 FY2024 earnings call

• Expressed sympathy for Southern California wildfire victims and outlined support efforts for impacted customers, community, and associates.
• 2024 was a record-breaking year with new highs in revenue, fee income, net income, earnings per share, loans, and deposits.
• Achieved $7 billion of deposit growth, 9% average deposit growth, and 6% average loan growth, diversifying portfolio via residential and C&I lending.
• Record fee income in 2024 driven by consistent sales execution in wealth management, commercial payments, and foreign exchange.
• Stable asset quality with 26 basis points net charge-offs and non-performing assets; two isolated problem credits in Q4 were noted.
• Repurchased 200,000 shares in Q4 at an average price of $98, and Board approved $300 million share repurchase authorization and 9% dividend increase to $0.60 per share.

Deposits: In 2024, East West grew end-of-period deposits by 13% to a record $63.2 billion, with average deposit growth of 9% year-over-year. Period-end total deposit cost declined to 2.59% in Q4. Loans: Total average loans grew 6% year-over-year, and end-of-period loans grew 3%. Focus on residential and C&I lending. Fee Income: Grew 12% in 2024, driven by wealth management, commercial payments, and foreign exchange. Net Interest Income: Rebounded in the back half of 2024 due to lower deposit costs, with net interest margin stable at 3.24%. Expenses: Fourth quarter efficiency ratio was 36.9%, with expense growth expected 7%-9% in 2025. Credit Quality: Asset quality remained relatively stable in 2024 with full-year net charge-offs and non-performing assets both at 26 basis points, though two problem credits were dealt with in Q4.

• 2025 loan growth expected in the range of 4% to 6% driven by strong C&I production and residential mortgage strength.
• Net interest income expected to grow in the range of 4% to 6% due to balance sheet growth and improving deposit costs/mix.
• Total revenue growth projected at 5% to 7% bolstered by fee income momentum.
• Expenses expected to increase 7% to 9% year-over-year, driven primarily by headcount and IT-related expenditures.
• Full-year net charge-offs projected in the range of 25 to 35 basis points, and effective tax rate expected in the range of 21% to 23%.

• Isolated problem credits in Q4, though considered isolated events and recovery efforts are ongoing.
• Potential credit impact from Southern California wildfires, though direct exposure is minimal currently.
• Economic and rate uncertainties that could materially affect financial results as forward-looking statements may differ from actual results.

Q: How should we think about investments in people and technology layered in during the year and its relation to expense growth?

A: Dominic Ng stated they continue to make investments needed for the bank's future, noting expense percentage is high relative to some but implied revenue growth outstrips expense growth leading to positive operating leverage.

Q: Is the change in buyback philosophy around utilizing the buyback related to share price or capital ratios?

A: Dominic Ng said the philosophy is opportunistic, being opportunistic in Q4 and will continue to be, with flexibility to act in shareholders' best interest.

Q: Where do deposit betas stand and is there more room to go down?

A: Dominic Ng said they've been guiding to ~50% beta and expect continued positive momentum as rates move lower, with CDs re定价 ahead of Fed cuts benefiting the bank.

Q: What's the outlook for CRE loan balances and credit risk?

A: Dominic Ng said CRE growth will be more muted, and credit risk profile in CRE book is strong with LTVs and loan sizes such that small rate impacts may have no major effect.

Q: Remind us of insurance requirements for SFR book affected by wildfires and loan impact?

A: Irene Oh said all impacted properties have adequate hazard insurance, LTVs are low, and borrowers have enough equity to rebuild, with minimal impact expected.

Q: How are you thinking about balance sheet growth and FHLB maturities?

A: Dominic Ng said they focus on supporting customers, managing investment liquidity, and will evaluate deploying excess funding from CD specials to manage FHLB maturities as needed.