East West Bancorp Bets on Cross-Border Payments and Wealth Management for Fee Growth

Key Points

• Cross-border payments are a key fee-growth initiative: East West has connected to nearly the entire Hong Kong banking market and launched a mainland China payments solution. Hong Kong-related activity has helped commercial deposit fees grow at a rate approaching double digits, with the bank expecting momentum to continue into 2027.
• The bank is building fee-based wealth management: After nearly two years seeking a partnership or acquisition, East West is developing its own registered investment adviser to complement its commission-based brokerage business. The CFO described it as a long-term strategy.
• East West is preparing for growth toward $100 billion in assets: The bank is assessing potential regulatory requirements while maintaining a 10% tangible common equity ratio and a portfolio it estimates is 97% high-quality liquid assets. It expects expenses to continue growing at a similar pace as it invests.

East West Bancorp NASDAQ: EWBC is expanding its cross-border payments capabilities and building a fee-based wealth management business as it seeks to grow alongside trade and capital flows between Asia and the United States, Chief Financial Officer Chris Del Moral-Niles said.

Speaking at an investor presentation, Del Moral-Niles said the bank has established direct connections to essentially the entire Hong Kong banking market and recently rolled out a cross-border payments solution for clients in mainland China. The bank expects easier fund transfers to support foreign exchange activity and commercial deposit fees.

The company had $86 billion in assets at the end of the third quarter and approximately 106 locations, according to the presentation’s operator. About 95% of its balance sheet is in the U.S., Del Moral-Niles said.

Cross-Border Payments and Fee Growth

Del Moral-Niles said East West serves U.S. retailers, importers and distributors while maintaining a presence in Asian markets that helps it connect with businesses looking to enter the U.S. He said relatively few U.S. banks have established a significant presence across the Pacific, leaving East West competing with a small group of much larger institutions.

The CFO said activity related to Hong Kong payments has helped commercial deposit fees grow at a rate approaching double digits. He expects similar positive momentum into 2027 as the mainland China offering develops, but declined to provide noninterest income guidance.

“The ability to do that seamless, timely transfer of funds really then facilitates the ability to do a related or next-step FX transaction,” he said.

Del Moral-Niles also said the bank’s targeted branch locations help keep costs down. East West places branches where its customers expect to find them, he said, allowing it to operate with a smaller footprint and lower advertising costs than many competitors.

Capital, Liquidity and the $100 Billion Threshold

East West maintains a 10% tangible common equity ratio in part to reassure customers while competing with larger banks, Del Moral-Niles said. He said the company’s return on tangible common equity was 17.2% in the most recent quarter.

As the bank approaches $100 billion in assets, the CFO said it is preparing for potential regulatory requirements while acknowledging uncertainty about whether the threshold will change. He said existing rules governing stress testing and liquidity could remain in place at that level.

East West has recorded roughly 8% compound annual expense growth over the past several years, with revenue growing faster, Del Moral-Niles said. He expects expenses to remain on a similar trajectory as the company invests and approaches $100 billion, adding that formal guidance would come in January.

He said the company remains focused on using its investment portfolio as a source of liquidity and estimated that 97% of the portfolio consists of high-quality liquid assets. Asked whether the bank would change its securities strategy, he said no.

Mortgage Growth and Deposit Costs

Single-family mortgages were the largest source of loan portfolio growth in the third quarter and will likely remain so in the fourth quarter, Del Moral-Niles said. He attributed the product’s appeal partly to underwriting that can accommodate borrowers with irregular income who make substantial down payments.

The CFO said the bank’s single-family and consumer lending is relatively small compared with its commercial real estate and commercial and industrial businesses, so additional mortgage growth helps diversify the portfolio.

On deposits, Del Moral-Niles said costs continued to be reasonably contained. He said the bank was retaining certificate of deposit balances even though its promotional rates were below alternatives available elsewhere, while noting that customer behavior could change if market rates rise further. He also credited outreach to small businesses for growth in demand deposit accounts.

Wealth Management Build-Out

East West is developing its own registered investment adviser after spending nearly two years looking for a suitable partnership or acquisition, Del Moral-Niles said. The move is intended to broaden the bank’s wealth capabilities beyond its existing commission-based brokerage model and toward fee-based advisory services.

He described the effort as the beginning of a potentially multidecade strategy, rather than offering a timeline for when it would become meaningful. Finding people with the appropriate licenses, experience and language skills remains challenging, he said.

On potential bank acquisitions, Del Moral-Niles said East West has evaluated opportunities but has not found the right fit. He said the company values the flexibility its strong capital position provides, including during periods of market stress.

About East West Bancorp (NASDAQ:EWBC)

East West Bancorp, Inc is the parent company of East West Bank, a full-service commercial bank headquartered in Pasadena, California. The bank serves businesses, professionals, consumers and institutions through a range of deposit, lending and financial services.

Its products and services include commercial and industrial loans, commercial real estate financing, residential and consumer lending, checking and savings accounts, treasury management, international banking, wealth management and foreign-exchange services.

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