East West Bancorp (NASDAQ:EWBC) reported robust results for Q3 2023, with net income reaching $288 million and diluted earnings per share at $2.02. The strong performance was fueled by record revenue and net interest income, alongside significant customer deposit growth and loan expansion.
Key takeaways from the call include:
- East West Bancorp's balance sheet remains strong and well-diversified, boasting the highest capital ratios among regional banks.
- The company plans to resume its share repurchase program in Q4 2023.
- The Board of Directors declared a quarterly common stock dividend of $0.48 per share.
- Net interest income was $571 million, with a net interest margin of 3.48%.
- Noninterest expense decreased by 4% quarter-over-quarter.
- The company is optimistic about finishing the year on a high note, with a resilient business model and a strong balance sheet.
- The bank anticipates continued modest compression in net interest margin due to the current rate outlook and potential future Fed actions.
The company's strong performance was facilitated by its ability to manage deposit costs, replacing higher-cost wholesale deposits with lower-cost customer funds. Noninterest income for the quarter was $77 million, with interest rate contracts and other derivatives income increasing by $4 million. East West Bancorp also reported a decrease in noninterest expenses by 4% quarter-over-quarter, driven by reductions in consulting costs, loan-related expenses, and comp and benefits expenses.
The company expressed confidence in its ability to navigate the current credit cycle, attributing the increase in special mention loans to broad-based factors rather than specific sectors. The bank stated that it's prudently taking on new customers from struggling banks and expects the net interest margin to stabilize near term, with potential lift from deposit growth and repricing of existing deposits.
Looking ahead, East West Bancorp is open to resuming stock buybacks opportunistically and stated that they always prioritize shareholder interests. They do not anticipate any big-ticket items that would significantly impact expense growth in the coming year.
During the call, executives also discussed the performance of their commercial loan portfolio, expense growth, net interest margin, deposit growth, and succession planning. They mentioned broad-based softness in the commercial loan book and expect increases in the classified and criticized asset ratio. However, the executives expressed confidence in their diverse loan portfolio's ability to withstand any challenges in specific industries such as office buildings.
CEO Dominic Ng expressed confidence in their diverse portfolio and strong customer base, which he believes will continue to outperform other banks, regardless of whether a recession or soft lending occurs. He concluded the call by expressing gratitude and looking forward to the next call in January.
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