East West Bancorp Raises Full-Year Net Interest Income Growth Guidance

East West Bancorp (NASDAQ: EWBC ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary East West Bancorp reported record revenue, net interest income, pretax, pre-provision income, and diluted earnings per share for Q3 2026, driven by strong customer relationships and a resilient business model. Deposits grew by over $1.4 billion, with money market deposits showing significant inflows, while the average deposit cost reduced by two basis points. The company raised its full-year net interest income guidance to 9-10% growth, reflecting strong asset repricing and controlled liability costs. Loan growth was led by residential and multifamily lending, with a 7% year-over-year increase, aligning with their full-year guidance.

Credit quality remained solid, with a decline in net charge-offs and stable nonperforming assets, leading to a reduction in full-year net charge-off guidance. Capital ratios remain strong, supporting future growth, with a common equity tier 1 ratio of 15.4% and a tangible common equity ratio of 10%. The company declared a fourth-quarter dividend of $0.80 per share and has $117 million available for share repurchases. Management highlighted the continued success of their 'shoe leather' strategy for deposit growth and an optimistic outlook for cross-border banking despite geopolitical tensions.

Full Transcript OPERATOR Good afternoon and welcome to East West Bancorp's third quarter 2026 earnings call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations.

Please go ahead. Adrienne Atkinson (Senior Vice President — Director of Investor Relations and Corporate Development) Thank you, operator. Good afternoon, and thank you everyone for joining us to review East West Bancorp's third quarter 2026 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Del Moral-Niles, Chief Financial Officer, and Irene Oh, Chief Risk Officer.

This call is being recorded and will be available for replay on our investor relations website. The slide deck referenced during this call is available on our investor relations site. Management may make projections or other forward-looking statements, which may differ materially from the actual results due to a number of risks and uncertainties. Management may discuss non-GAAP financial measures.

For a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic. Dominic Ng (Chairman and Chief Executive Officer) Thank you, Adrienne. Good afternoon and welcome to all who have joined the call.

East West delivered another quarter of strong performance, generating record revenue, record net interest income, record pretax, pre-provision income, and record diluted earnings per share. These results reflect the value of our customer relationships and the resilience of our business model. Deposits reached new record levels with over $1.4 billion of net deposit growth, with nice inflows of money market deposits. Deposit growth continued to be a key driver of our performance.

Notably, we reduced our average deposit cost in the third quarter by two basis points even as we grew balances to record levels. Deposit costs have been well controlled in the first two weeks of the fourth quarter. Loans also hit records this quarter, with prudent growth led by residential and multifamily lending. This balance sheet growth contributed to record net interest income.

Net interest income is up 9.5% year over year for the nine months through September, which leads us to raise our full-year guidance today. Just as importantly, asset quality remained solid. Charge-offs, nonperforming assets, and criticized loans remained well controlled and within our expectations, reflecting the quality of our portfolio and our disciplined approach to risk management. Given our lower-than-expected year-to-date net charge-offs, we are also updating our net charge-off guidance lower for the year.

East West continues to operate from a position of strength. Our diversified business model, conservatively managed balance sheet, and industry-leading profitability allow us to deliver an over 17% return on average tangible common equity while maintaining a greater than 10% tangible common equity ratio. With that, let me turn the call over to Chris for a more detailed review of our financial results. Christopher Del Moral-Niles (Executive Vice President & CFO) Thank you, Dominic, and good afternoon to everyone on the call.

Turning to slide 4, we have more details on our deposits. We enjoyed broad-based deposit growth this quarter. We were particularly encouraged by the strong money market deposit growth that Dominic just mentioned. Average noninterest-bearing deposits increased 16% year over year, and our focus on small business checking accounts also continued to bear fruit.

Noninterest-bearing demand deposits continue to represent over 26% of our total deposits at quarter end, providing an important source of stable funding and supporting our ability to effectively manage our deposit costs. Turning to slide 5, some highlights on loans. Loans grew 7% year over year, consistent with our 6% to 8% full-year 2026 guidance. As we previously communicated, residential mortgage came in as this quarter's standout with nearly $400 million of net growth.

We continue to expect residential mortgage to be a key contributor to our growth given our robust current pipeline. Multifamily lending also had a strong quarter, reflecting continued broad-based housing demand in our core markets. CRE growth this quarter was led by our longstanding real estate clients getting back into the market, sometimes at discounted levels. C&I balances declined modestly from the second quarter, largely reflecting reductions in nondepository financial borrowings in business credit, mortgage credit, and other NDFI categories.

Switching to NII and margin on slide 6, our net interest margin expanded by 6 basis points quarter over quarter as positive asset repricing and flat liability costs drove NII to record levels. We note that both average total deposit cost and total cost of funds declined 2 basis points quarter over quarter. Given September's rate hike and our strong third quarter performance, we now expect full-year NII growth of 9% to 10%. The guidance assumes that short-term rates remain at current levels through the end of the year, so flat rates through December.

Moving on to fees on slide 7, for the first nine months of 2026, fee income has increased 11% year over year, supported by strong year-to-date growth in wealth management, deposit-related fees, and foreign exchange income. We continue to expect full-year fee income to grow by more than 10% for all of 2026. Looking at expenses on slide 8, total operating noninterest expense declined for the quarter. The decline was primarily driven by other operating costs and lower comp and employee benefits expense.

As a result, East West delivered another quarter of industry-leading efficiency. The Q3 efficiency ratio improved to 34.4%, while operating noninterest expense as a percentage of average assets declined 8 basis points to 1.21%. Both of these are industry-leading metrics. Year-to-date growth in operating noninterest expense is 8%, in line with our guidance, and we remain comfortable with our overall full-year expense guidance.

I'll now hand the call over to Irene for comments on credit and capital. Irene Oh (Chief Risk Officer) Thank you, Chris, and good afternoon to all on the call. As you can see on slide 9, credit performance remained resilient in the third quarter. Net charge-offs declined to 15 basis points, or $22 million, in the third quarter compared to 19 basis points in the second quarter, or $27 million.

Year to date, annualized net charge-offs were 14 basis points. Given our performance through the first nine months of the year and our current visibility, we have narrowed our prior guidance for net charge-offs and now expect full-year charge-offs to be 15 to 20 basis points. Quarter over quarter, nonperforming assets saw a slight uptick of 1 basis point to 30 basis points as of September 30, 2026. We recorded a provision for credit losses of $45 million in the third quarter compared with $33 million for the second quarter.

Overall, credit performance remained solid. We continue to manage credit risk with vigilance and discipline. Turning to slide 10, the allowance for credit losses increased $23 million to $865 million, or 1.45% of total loans as of September 30, reflecting quarter-over-quarter loan growth and portfolio mix shift. Our allowance coverage ratio increased 2 basis points from the prior quarter and remains at a healthy level relative to the risk of the portfolio.

Turning to slide 11, East West's capital position remains a significant source of strength and strategic flexibility. All regulatory ratios remain well in excess of regulatory requirements for well-capitalized institutions and continue to compare favorably to both regional and national banks. At quarter end, our common equity tier 1 ratio was 15.4%, while the tangible common equity ratio was 10%. These levels support current and future balance sheet growth.

East West ended the quarter with $117 million of repurchase authorization that remains available for future buybacks and declared a fourth quarter 2026 dividend of $0.80 per share. I'll now turn the call back to Chris. Christopher Del Moral-Niles (Executive Vice President & CFO) Thank you, Irene. So to recap, we've updated three elements of our guidance today, each of which is reflected on slide 12.

Number one, we're increasing our NII outlook assuming flat rates. Two, we're reducing our full-year net charge-off range. And three, we're narrowing our expectation for the amortization of tax credits and CRA investments, all of which are reflected again on slide 12. With that, we'll now open the call to questions.

Operator. OPERATOR Thank you. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue at this time. I'll pause momentarily to assemble our roster.

The first question comes from Casey Hare at Autonomous Research. Please go ahead. Christopher Del Moral-Niles (Executive Vice President & CFO) Good afternoon, Casey. Casey Hare (Analyst) Yeah, great, thanks.

Good afternoon, everyone. Chris, wanted to touch on the deposit beta and the shoe-leather strategy, which has obviously got pretty good momentum here. When I look at you guys, your cum beta on the last up cycle on an IBD basis, it was—where was it? 60, 72.

So with the shoe-leather strategy working, is there an opportunity to come in below that this go-around with the Fed hiking? Christopher Del Moral-Niles (Executive Vice President & CFO) I think what we've said before, I would stand by, which is higher rates overall will get more customer attention to how much their opportunity cost actually costs them. So will I tell you that I expect to do better? The reality is we were at once upon a time at 40%.

We came down into the low 20s. We're continuing to work our way up, we're continuing to build on that, but I'm not sure I've changed the economics of deposit math. And so the reality is we continue to make progress, we continue to build the DDA book, but if rates go materially higher, we'll still see some bleed-off. On the other hand, as we've shown already, even with rates ticking down just a little bit, we'll probably see continued improvement in DDA over time.

Casey Hare (Analyst) Got you. Okay, great. And then I guess just switching to the loan side of things, can you just give us a flavor of where new-money loan yields are across your products versus the third quarter rate? Christopher Del Moral-Niles (Executive Vice President & CFO) I look at the broad cross section of our commercial loans.

They're generally SOFR-based, and we're generally somewhere between SOFR plus 200, 225, and 250. Obviously C&I and CRE sometimes trade places in that range, but that's the right range to focus on. Casey Hare (Analyst) Great, thank you. OPERATOR The next question is from Ryan Kenny at Morgan Stanley.

Please go ahead. Christopher Del Moral-Niles (Executive Vice President & CFO) Good afternoon, Ryan. Ryan Kenny (Analyst) Hi, good afternoon. Thanks for taking my questions.

So you mentioned no hike in the guidance, and so if we were to get a hike at some point this year, would that potentially push you more towards the high end of the range? Christopher Del Moral-Niles (Executive Vice President & CFO) That's correct. And I think what we've quantified before is that we believe a 25 basis point hike is worth $2.5 million per month with a bit of a lag. We've usually put that lag at about 45 days.

But to the extent that the forwards are pricing in a hike, it may come through a little sooner, which we certainly observed in the September hike. Ryan Kenny (Analyst) And then separately, in the deck it shows that the criticized loans and nonperforming assets picked up a little bit sequentially. And so just wondering if you could give any color on what drove that. Irene Oh (Chief Risk Officer) Yeah, if you look at the details, and we show a little bit more on the slides, the increases did come in C&I and those categories.

Not one area or asset class we're most concerned about. But both special mention and substandard ticked up a little. OPERATOR The next question is from Dave Rochester at Cantor. Please go ahead.

Dave Rochester (Analyst) Hey, good afternoon, guys. Wanted to start on your outlook for the 4Q NIM to be broadly stable versus 3Q just given the September hike. I know things may have started a little bit for you earlier, the benefit of the third quarter, but if the same thing happens with a potential December hike, think that you would have some extra lift there that could get you a little bit higher on the NIM. So I'm wondering what are some of the offsets that you're thinking about?

Is it just deposit costs start to move or is there something else going on? Christopher Del Moral-Niles (Executive Vice President & CFO) That's a combination of could deposit costs chip into that, which we thankfully haven't seen here through the first couple of weeks of October, as Dominic mentioned. But again it's early and we could see that. And certainly if there's a recurring pattern of additional hikes, we would expect to see some of that catch up into our numbers.

But we're still fundamentally asset sensitive, Dave. So to your broad question and following up on Ryan's comment, yes, I think if we saw higher rates we would expect NII to grow. Dave Rochester (Analyst) Yep. I would think that the margin could maybe expand a little bit then in 4Q, is that fair?

Christopher Del Moral-Niles (Executive Vice President & CFO) Based on what we're seeing right now, we think the margin holds broadly consistent, but it could expand. Dave Rochester (Analyst) Okay. And my follow-up question on the FX line was wondering if the fee growth were related to the rollout of the new platform to the Mainland China customers this quarter. And if you could just talk about where you are in that rollout and any early reports on how that's going, that'd be great.

Christopher Del Moral-Niles (Executive Vice President & CFO) Yeah. So our full program, our Asia payments program, is in effect for all of our Hong Kong-based activity, and we are largely seeing upticks both in number of transactions, individual wire counts, and dollar volumes. So that's working for us. Those wire fees are largely reflected in the commercial deposit-related fees.

Foreign exchange activity really has just been driven by other customer transactions and other customer activity, some hedging activity, and some notable spot transaction activity that we saw throughout the quarter. With regard to our Mainland China program, that is now live, but transaction volumes are still modest. But we expect that to kick in as we roll through the fourth quarter and into the first quarter of next year. Dave Rochester (Analyst) All right, great.

Thanks. Appreciate it. OPERATOR The next question is from Bernard von Giescki at Deutsche Bank. Please go ahead.

I'm sorry if I mispronounced your name. Christopher Del Moral-Niles (Executive Vice President & CFO) Good afternoon, Bernard. Bernard von Giescki (Analyst) All right, good afternoon. Just on my first question, maybe on the wealth management fees, I know that ticked down 4 million linked quarter, and I know that was on lower activity, but just any other color you can provide in that line item and expectations, maybe how the quarter just started.

Christopher Del Moral-Niles (Executive Vice President & CFO) We've had really strong results earlier in the year in our structured product sales, predominantly structured notes, and those had provided some nice lifts particularly in the first quarter.