East West raises 2026 NII growth outlook to 9%-10% while cutting net charge-off guide to 15-20 bps

• “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,” said (Chairman, President & CEO Dominic Ng), tying results to “the resilience of our business model.”
• (CEO Ng) highlighted deposit momentum and funding costs: “Deposits reached new record levels with over $1.4 billion of net deposit growth,” and “we reduced our average deposit cost in the third quarter by 2 basis points even as we grew balances to record levels.”
• (CEO Ng) said loan balances also hit a high watermark: “Loans also hit records this quarter with prudent growth led by residential and multifamily lending,” adding that “net interest income is up 9.5% year-over-year for the 9 months through September, which leads us to raise our full year guidance today.”
• (Executive VP & CFO Christopher Del Moral-Niles) emphasized deposit mix and stability: “Average noninterest-bearing deposits increased 16% year-over-year,” and “Noninterest-bearing demand deposits continue to represent over 26% of our total deposits at quarter end.”
• (CFO Del Moral-Niles) described loan mix shifts: “Residential mortgage came in as this quarter’s standout with nearly $400 million of net growth,” while “C&I balances declined modestly from the second quarter, largely reflecting reductions in non-depository financial institutions.”
• (Executive VP & Chief Risk Officer Irene Oh) summarized credit and capital: “Net charge-offs declined to 15 basis points or $22 million,” and “At quarter end, our common equity Tier 1 ratio was 15.4%, while the tangible common equity ratio was 10%.”

Outlook

• (CFO Del Moral-Niles) updated the company’s rate backdrop and NII expectations: “Given September’s rate hike and our strong third quarter performance, we now expect full year NII growth of 9% to 10%,” and “The guidance assumes that short-term rates remain at current levels through the end of the year.”
• (CRO Oh) lowered charge-off expectations: “We have narrowed our prior guidance for net charge-offs and now expect full year charge-offs to be 15 basis points to 20 basis points.”
• (CFO Del Moral-Niles) reaffirmed fee and expense trajectories: “We continue to expect full year fee income to grow by more than 10% for all of 2026,” and “we remain comfortable with our overall full year expense guidance.”
• Compared with Q2, management again anchored outlook to flat rates, but raised NII growth (Q2: “up 7% to 9%”; Q3: “9% to 10%”) and tightened/lowered credit-cost expectations (Q2: “15 basis points to 25 basis points”; Q3: “15 basis points to 20 basis points”).

Financial Results

• (CFO Del Moral-Niles) said profitability benefited from margin and funding: “Our net interest margin expanded by 6 basis points quarter-over-quarter,” and “both average total deposit cost and total cost of funds declined 2 basis points quarter-over-quarter.”
• (CFO Del Moral-Niles) cited operating leverage: “Total operating noninterest expense declined for the quarter,” and “The Q3 efficiency ratio improved to 34.4%.”
• (CRO Oh) detailed provisioning and reserves: “We recorded a provision for credit losses of $45 million in the third quarter compared with $33 million for the second quarter,” and “The allowance for credit losses increased $23 million to $865 million or 1.45% of total loans.”
• (CRO Oh) noted asset-quality markers: “nonperforming assets saw a slight uptick of 1 basis point to 30 basis points.”
• (CRO Oh) added shareholder returns and flexibility: “East West ended the quarter with $117 million of repurchase authorization” and “declared a fourth quarter 2026 dividend of $0.80 per share.”

Q&A

• Casey Haire, Autonomous Research: asked if “shoe leather strategy” could reduce cumulative deposit beta vs. the prior cycle; (CFO Del Moral-Niles) responded, “I’m not sure I’ve changed the economics of deposit math,” adding, “if rates go materially higher, we’ll still see some bleed-off.”
• Ryan Kenny, Morgan Stanley: asked if a hike could push results to the high end; (CFO Del Moral-Niles) said, “a 25-basis-point hike is worth $2.5 million per month,” and (CRO Oh) attributed criticized/NPA movement to C&I where “both special mention and substandard ticked up a little.”
• David Rochester, Cantor Fitzgerald: pressed on 4Q NIM offsets and FX platform rollout; (CFO Del Moral-Niles) said deposit costs “could chip into that,” while the Asia payments program is driving “upticks,” and Mainland China is “now live, but transaction volumes are still modest.”
• David Chiaverini, Jefferies: questioned DDA durability and CD reinvestment; (CFO Del Moral-Niles) described the door-to-door effort and said “more than $1 out of $4 of net deposits on average has come to us in incremental DDA,” while flagging “$15 billion rolling off during the fourth quarter of CDs.”
• Christopher McGratty, KBW: asked about fee build-out and AI; (CFO Del Moral-Niles) said, “we’re still very much in the early innings,” and on AI, “we haven’t quite found the right use case yet that boosts revenue,” while (CEO Ng) added, “we are early followers.”
• Ebrahim Poonawala, BofA Securities: asked about “higher for longer” credit risk and cross-border trends; (CRO Oh) said “Higher, higher for longer does increase credit risk,” but cited “disciplined… low loan to values,” while (CEO Ng) said, “tariffs… [are] a very day-to-day common thing,” and “we continue to build better capability” in cross-border banking.
• Jared Shaw, Barclays: asked about tariff refunds and OREO; (CFO Del Moral-Niles) said refunds were “a small positive” and “the on-balance sheet portion… is less than $200 million,” while (CRO Oh) said OREO came from foreclosures and deeds-in-lieu and “we’re working through it.”
• Benjamin Gerlinger, Citi: asked about fee add-ons and $100 billion tailoring rules; (CFO Del Moral-Niles) said the bank “formally launch[ed] our registered investment advisory entity,” and “we have built an HQLA-oriented investment portfolio” in anticipation of potential rule changes.

Sentiment Analysis

• Analysts: slightly negative to neutral, with repeated probing on deposit beta, CD repricing risk, criticized loan upticks, and NIM sensitivity to hikes.
• Management: slightly positive in prepared remarks (“position of strength”), but more cautious in Q&A on rate-driven deposit pressure (“we’ll still see some bleed-off”) and credit (“does increase credit risk”).
• Versus Q2, the tone shifted toward more rate-path uncertainty (discussion of September hike and potential December hike) and more detailed scrutiny of criticized C&I and OREO, while management confidence centered on raised NII guidance and lowered charge-off guidance.

Quarter-over-Quarter Comparison

• Q3 brought a higher NII growth outlook (Q2: “up 7% to 9%”; Q3: “9% to 10%”) and a lower/narrower net charge-off range (Q2: “15… to 25”; Q3: “15… to 20”).
• Q2 emphasized record noninterest income and fee growth; Q3 emphasized margin expansion, controlled deposit costs, and scaling DDA via the “shoe leather strategy.”
• Analyst focus broadened from Q2’s margin/expense and deposit pricing toward Q3’s CD roll-off size, deposit beta, and incremental credit indicators (criticized C&I and OREO).

Risks and Concerns

• (CRO Oh) cautioned that “Higher, higher for longer does increase credit risk,” while pointing to “disciplined… low loan to values” as a mitigant.
• (CFO Del Moral-Niles) flagged funding sensitivity: “if rates go materially higher, we’ll still see some bleed-off,” and highlighted the near-term repricing event: “we’ve got $15 billion rolling off during the fourth quarter of CDs.”
• (CRO Oh) noted portfolio watch items in C&I: “both special mention and substandard loans for C&I increased a little,” though she said, “we’re comfortable we’ll be able to help our clients work through this.”

Final Takeaway

Management framed Q3 as a record quarter driven by record deposits and loans, expanding margin, and operating expense discipline, and raised full-year NII growth guidance to 9%-10% while lowering expected net charge-offs to 15-20 basis points. In Q&A, investors repeatedly pressed on deposit beta, CD repricing risk (including $15 billion of CDs rolling in Q4), and early credit signals in criticized C&I and OREO; management acknowledged higher-for-longer risk while leaning on underwriting discipline, stable funding mix, and continued fee initiatives including a newly launched RIA and growing Asia payments capabilities.

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