East West (EWBC) Q2 2025 Earnings Call Transcript

The analysis indicates that From an analytical standpoint, Image source: The Motley Fool

Moreover, Efficiency Ratio: Recorded at 36

Capital Ratios: Common equity Tier 1 ratio increased nearly 20 basis points to 14

In contrast, SUMMARYEast West Bancorp (EWBC -2. 37%) reported record net interest income and revenue in Q2 2025, underscored by strong loan and deposit growth, imved asset quality metrics, and disciplined expense management

In contrast, Capital levels remained robust with key regulatory ratios materially above well-capitalized thresholds, while low levels of non-performing assets (22 basis points of total assets) and criticized loans (2

Conversely, Chris Del Moral-Niles emphasized the company's asset sensitivity and stated, "fewer rate cuts is better for us," indicating the firm could benefit from a higher-for-longer rate environment

Management noted that commercial deposit growth complemented consumer and balances, reinforcing customer relationship depth across key segments

Conversely, The commercial real estate portfolio experienced modest growth, as the bank continues to prioritize diversity across industries and lending ducts

Nevertheless, The company repurchased fewer s primarily due to blackout periods tied to earnings preparation and market timing considerations

Future expense growth will be driven by investments in talent, digital infrastructure, compliance, and fraud prevention to support the bank's strategic and regulatory evolution as it continues to grow in size

INDUSTRY GLOSSARYCECL model: Current Expected Credit Loss; accounting method requiring banks to estimate expected lifetime credit losses on loans, incorporating forward-looking macroeconomic variables

Criticized Loans: Loans identified by management as having elevated credit risk, typically including both special mention and classified assets under regulatory definitions

Special Mention: Loans exhibiting potential credit weaknesses or trends that, if not corrected, may result in further deterioration -- ranked below classified but above pass assets

Common Equity Tier 1 (CET1) Ratio: A regulatory capital ratio comparing core equity capital to risk-weighted assets, serving as a key measure of a bank’s capital strength

Full Conference Call TranscriptDominic Ng: Thank you, Adrienne

And thank you for joining us for our second quarter earnings call (remarkable data) (noteworthy indeed)

Nevertheless, Additionally, I'm pleased to report strong second-quarter results

At the same time, We continued to grow the bank and reported record quarterly revenue and net interest income (something worth watching)

Our relationship-driven model continues to drive consumer and commercial growth on both sides of the balance sheet

Moreover, Asset quality has remained resilient, and credit is performing as expected, in this volatile climate

Additionally, Both criticized and non-performing loans decreased from the end of the first quarter, in light of current trends

We continue to focus on using our capital to support customers and capitalize on any market opportunities that arise

What the re reveals is is the third consecutive year we have earned a top spot and is our fourth title in the past five years

Moreover, This achievement is a testament to the steady execution of our associates and our customer focus

I will now turn the call over to Chris to vide more details on our second-quarter financial performance

Moreover, Chris Del Moral-Niles: Thank you, Dominic (fascinating analysis)

Let me start with a recap on our deposits

Additionally, We were particularly encouraged by the strong growth in noninterest-bearing deposits this quarter, given current economic conditions

Additionally, We also saw growth in interest-bearing checking, money market, and time deposit balances, rounding out another great deposit-led quarter

We saw notable growth in our commercial deposit segment, complemented by continued growth in our consumer and banking balances, underscoring the value of our strong customer relationships across the board

We continue to expect customer deposits will fund our loan growth this year, amid market uncertainty

C&I lending was the largest contributor, with new originations coming from a broad range of industries, while utilization remained broadly stable quarter over quarter

Three weeks into this quarter, our pipelines remain active, and we expect to continue growing C&I throughout this quarter

However, Demand for residential mortgage ducts also ved relatively durable, and at current rates, we continue to see a strong pipeline into Q3

We would expect residential mortgage to contribute a similar or higher volume to the balance sheet in Q3

We also grew our commercial real estate balances modestly this quarter, as we continue to support our long-standing CRE clients

Slide six covers our net interest income trends

Additionally, At the same time, We continue to expect dollar net interest income growth as we gress throughout the year, in this volatile climate

This sustained execution on fee income levels reflects our focus on the ducts, services, and capabilities that will further diversify our revenue over time (an important development)

Additionally, Turning to expenses on slide eight, East West continued to der industry-leading efficiency while for its future growth

At the same time, The Q2 efficiency ratio was 36

We continue to expect expenses will come in line with our guidance for the full year

Now, let me hand the call over to Irene for some s on credit and capital

Irene Oh: Thank you, Chris, given current economic conditions

Nevertheless, And good afternoon to all on the call

As you can see on Slide nine, our asset quality metrics continue to broadly outperform the industry

On the other hand, With criticized non-accrual loans and non-performing asset metrics all imving

The criticized loans ratio decreased during the quarter by 14 basis points to 2, in this volatile climate

At the same time, The special mention ratio decreased 10 basis points quarter over quarter to 81 basis points of total loans while the classified loans ratios decreased four basis points to 1

We remain vigilant and active in managing our credit risk

Furthermore, We believe we are adequately reserved for the content of our loan portfolio given the current outlook (this bears monitoring)

Moreover, Turning to Slide 11, as Dominic mentioned, our strong capital level allows us to operate from a position of strength and support our customers with confidence

Furthermore, All of East West's regulatory capital ratios remain well in excess of requirements for well-capitalized institutions, and well above regional and national bank peers, in this volatile climate

This leads to the conclusion that se capital ratios place us amongst the best-capitalized banks in the industry

Nevertheless, I will now turn it back to Chris to our outlook, considering recent developments

Meanwhile, Chris Del Moral-Niles: Thank you, Irene

On the other hand, We're making a few to our full-year outlook this time (an important development)

We're also adjusting our outlook on net charge-offs (remarkable data)

And we now expect full-year net charge-offs to fall in the range between fifteen and twenty-five basis points

With that, let me turn the call over to the line for questions

However, Operator: We will now begin the question and answer session

Before pressing the keys

Our first question today is from Casey Haire with Autonomous

Additionally, Please go ahead (which is quite significant), in today's financial world

Casey Haire: How are you doing

So first question just beyond the margin

Just wondering your ability to sustain both of them going forward

Chris Del Moral-Niles: Yes

Furthermore, So I think we're looking at deposit cost optimization on a continuous basis

Moreover, Conversely, And in fact, that will bably be a continued focus for us here in Q3 whether or not we get a rate cut or not in September, given the current landscape

We think there's opportunity for us to do some more work on that front and we'll continue to manage that

Nevertheless, Obviously, we lowered our total deposit costs a few basis points this quarter and we remain focused and diligent on that

Furthermore, On the asset repricing side, I think we continue to expect I think there's always a bit of a day count effect from the first to the second quarter in mortgages and mortgage-backed securities, amid market uncertainty

But beyond that, I think we continue to expect that those fixed-rate asset classes will have an opportunity to reprice positively

So we're optimistic that we'll be able to maintain the margin within a range of reasonableness through the third quarter

And obviously, we'll see how and when rate cuts come after that, given the current landscape

And then just wanted to touch on credit

Nevertheless, You guys did build the reserve led by C&I

Looks despite favorable migration and you took your charge-off guide down

Moreover, Just maybe a little color on what's going on there (noteworthy indeed)

What are you seeing in C&I

Conversely, Or did you just change the weightings around

Just a little color on reserve build

On the other hand, Irene Oh: Hi

On the other hand, I'll answer that

It wasn't anything specific that we saw within the C&I book (an important development)

I'll just kind of that it really has to do with the CECL model and the economic outlook and forecast

Operator: The next question is from Manan Gosalia with Morgan Stanley

Furthermore, Please go ahead (remarkable data)

Manan Gosalia: Hey, good afternoon

Dominic Ng: Good after.