John Rowe

John Rowe (on behalf of Jared Shaw) asked about the roll-on yield and the floating versus fixed mix for new C&I and CRE loans being added to the balance sheet. He also inquired about expectations for potential action on the 2019 New York rent-regulated law change ahead of the governor election later in the year, and broader thoughts on the election's implications.

Answer

Lee Smith, Senior Executive Vice President and CFO, stated that C&I loans are coming on at a spread to SOFR of 175-300 basis points (blended ~230 bps), while new CRE loans are at SOFR + 200-225 basis points. Joseph Otting, Chairman, President, and CEO, commented on the 2019 NYC legislation, suggesting potential common ground to fix issues like 'ghost units' (50-60 thousand vacant units) by making it economic to remodel them. He noted ongoing dialogue between property managers, owners, and the city, and that the bank is closely monitoring the situation.

John Rowe asked about the new roll-on yields for C&I and new CRE originations, including the floating versus fixed mix of these loans. He also inquired about expectations for potential actions on the 2019 rent-regulated law change in New York ahead of the governor election, and broader thoughts on the election's impact.

Answer

Lee Smith, Senior Executive Vice President and Chief Financial Officer, stated that C&I loans are originating at a spread to SOFR of 175 to 300 basis points, with a blended average around 230 basis points. New CRE growth is coming on at SOFR plus 200 to 225 basis points. Joseph Otting, Chairman, President, and CEO, discussed the 2019 legislation, noting potential common ground on 'ghost units' (vacated units uneconomic to remodel), estimated at 50,000 to 60,000 units. He emphasized ongoing dialogue between property managers, owners, and the city, and the bank's focus on ensuring safe environments and curing violations.

John Rowe inquired about the decreasing floating-rate portion of East West Bancorp's securities portfolio and any target levels, as well as the overall trends in lending spreads and competitive pricing in the market.

Answer

Christopher Del Moral-Niles, CFO, stated that the bank has found more relative value in fixed-rate securities, a prudent strategy given anticipated rate cuts. He noted a broad compression in lending spreads of about a quarter of a percentage point over the last year, but observed that pricing has been holding steady in the most recent 30-60 days.

John Rowe inquired about the trend in the floating rate portion of East West Bancorp's securities portfolio and whether there's a target level, or if recent additions have been more fixed-rate. He also asked about overall lending spread trends and competitive pricing levels in the bank's market.

Answer

CFO Christopher Del Moral-Niles explained that the bank has seen more relative value in fixed-rate securities and has leaned towards those purchases given anticipated rate cuts. He noted that lending spreads have broadly compressed by about a quarter of a percentage point over the last year due to competitive pressure, but appear to be holding steady in recent months.