Okay. Up next, we have EastWest Bank, and I'm delighted to have with us today, Dominic Ng, Chairman and CEO. Dominic, thanks so much for joining us. Thank you. Thank you for inviting me here. So, Dominic, one part of the environment that I did want to bring out, just given that you have this unique vantage point into both the U.S. and Asia-Pacific economies, what do you think investors may be underappreciating about how the relationship between these two large economies is evolving over time? And what does that mean for you and your clients?

Well, at East West Bank, we've always been proud to be that financial bridge between the East and West. Really, we are talking about US and the Asia Pacific. And in fact, it's been decades. We've seen that the Asia Pacific region has been growing in a much faster pace than the rest of the world. And U.S. being the largest economy in the world, obviously, everyone wanted to do trade or investment with U.S., particularly that U.S. currency is really the most powerful currency ever. And I don't think that sort of business in any way is slowed down. It got detoured into There may be some particular industry, such as we talk about these very high-end, sophisticated semiconducting chips, or maybe the most innovative life science type of business. There may be some issues that prohibit the Asia Pacific from investing in the US. The reality is that investment keeps going. And so we, as a bank, that have spent decades of building expertise in this area, and also, fortunately, the vast majority of banks in the United States really don't have much interest in sort of understanding the potential in that region. and that helped East-West tremendously because we don't really have much competition out there when it comes to competing with our peers in the banking industry because the domestic market in the United States is so big and everyone gets busy working on most of the domestic business and we have the entire lane of opportunity wide open for us and we continue to benefit from it and our cross-border banking business continue to stay very strong and we continue to as you see what our financial performance have been continuously doing really well and we get record earnings after record earnings not because of we're taking sort of unnecessary risk and whatnot it's really coming back down to we have a unique value proposition and have a very unique business that add the extra what I call the extra gravy on top to help east-west come up above average performing bank to a top quarter performing bank simply because with our active involvement with the US and Asia Pacific trade and investment.

Okay. So, you know, unique positioning, unique relationships. And for your clients, I guess the investment cycle continues and there are capital flows. But maybe just bringing it a little bit more near to, you know, the geopolitical environment. There's always been some concerns along the line, but, you know, maybe the concerns are a little bit more elevated today. What are you hearing from your client base there?

Yeah, I think that, I mean, a good example that you're talking about is that U.S., China, that competitive environment, you know, the largest economy versus the second largest economy, and they are both spending enormous resources on AI, you know, and from the technology side and building up the economy and whatnot. there's that competitiveness out there and banks like us that understand the dynamic so well we know how to navigate and a good example would be if I looked at from a perspective of what I talked about earlier obviously we're not going to be actively engaging doing banking with you know, let's say the Chinese companies that are actively involved with AI to drones and so forth. But then there are a bunch of business in China that are actively engaged in consumer brands. In fact, they continue to come to U.S. and acquire consumer brands and continue to expand the business and because so many of those businesses in Asia are now looking at markets beyond their territory and where's the best market of course the United States because this is such a huge consumer base here right so many of them are acquiring consumer brands in US and here we are US East West Bank are there to support them the other part will be you look at students as much as we hear a lot of noises, headline news saying that U.S. are not granting visas to foreign students and whatnot. There's still enormous number of students coming to the United States for their undergraduate and more so graduate programs because U.S. is the best place for high-level education. And that hasn't stopped. And many of those folks continue to stay in U.S. and further their career. And many of them end up being East-West Bank customers. And as a professionals, they're working in U.S. And later on, when they became entrepreneurs, they're also banked with East-West. And so we are benefiting from this growing population. And the population tend to increase their net worth at a much faster pace, and then all indirectly helping East West Bank to benefit from it.

And, you know, you can clearly see it in the deposit growth and the expense ratios, which I know we'll get into. But one of the things you've spoken about is your ability to follow clients based on how their geographic mix evolves, right? So from the student community, you know, you get in early on the consumer side, but also from the business and commercial side, you can follow your clients wherever they go. Can you talk a little bit more about that and what you bring to the table there?

Well, a good example is that we have a subsidiary bank in China. We also have a food service branch in Hong Kong and a lot of our clients in U.S. by the way you look at our balance sheet you know like a 95 percent of our you know assets deposit based in the united states and the fact is uh but we started identifying these clients or prospects even when they start thinking about okay how do i expand in the united states and we've already been working with some of these folks there in hong kong and so forth and helping them to, you know, make sure they set up their business properly in the United States. So a lot of these customers that came to the United States with meaningful deposit balances and also opened a business account, signed inducting business in the U.S. are being guided by our branch managers, by our lending officer, by our international bankers and so forth and helping them to reach further in the United States, helping them to assimilate and then also form partnership with U.S. partners. And those are the things that we do best. And those values build tremendous trust in the banking relationship. That's why oftentimes people always wonder that, how do East-West Bank be able to have a cost of funds that will lower the other banks? Or what exactly you do? and then we said relationship is that what kind of relationship well a lot of time it's beyond banking relationship when they first come to us and they need support they need help and will provide a lot of service help them to adjust to the environment you know some of them as i said earlier even when they were students we start helping them even when they were students and then the parents who come over is that you take good care of my kid i'll make sure i take care of your bank right so those are kind of things that we do really well and with I've been at East West Bank for 34 years as a CEO and I looked at it is that when

we were very small we've done that and when we are now much bigger we're still doing that and so far so good to help us continue to grow organically nicely but even on the commercial side you know as supply chains have evolved over the past few years you've been able to follow your clients different areas of the Asia Pacific as well. Can you talk a bit more about that?

Oh, absolutely. I mean, for example, I would say 10, 15 years ago, the vast majority of the manufacturing that support import to US in China. But as the geopolitical issues slipped, and many of our clients start that manufacture in China and start moving their manufacturing plants to Vietnam, to Thailand, to Malaysia, Indonesia, but it's basically the same customers that actually originated goods initially from China, but now start going to these other Southeast Asia countries. We at East-West continue to be able to follow that direction and help them and guide them, and then still doing business with them. And then the same thing when it comes to tariff, We're able to help them to navigate, to make sure that we stay on top of the tariff issue, identify the risk, and help guide these customers and make sure that get them through the process. And then to a certain extent, we end up picking up many new clients. In fact, at the Trump administration, the first Trump administration, You look at it, it's the first time when we have this big tariff hit to a lot of importers. But the reality is that we know how to help the clients to navigate. And then, interestingly enough, many other banks didn't want to learn much about it, didn't quite understand it. They just look at, anyone get a hit with tariffs must be too risky, exit, exit. we were able to end up taking on those clients who are perfectly fine. Financially, they may not be making as much profit as it used to be, but they're still solid gold as commercial clients, and we're able to sort of bring them over. And as you have seen, we're hardly taking any sort of charge off throughout this whole period of time.

And now we're benefiting from some of these clients are getting terrible refund you know and then deposits start coming in and says whoa nice no big big paycheck you know and and in the longer term it does drive the stickiness of the client relationship as well yeah Dominic maybe to pivot over to AI you know I want to get your thoughts there first I guess how is east-west using AI today and and how is that impacting how you run the business and then as you look out three to five years how do you see that evolving and efficiency ratios 35% gonna get even better than that with with AI

could just just talk a little bit more about what you're doing there well I think AI AI is extraordinary powerful and I think it's gonna make huge impact to society throughout the world that's the given and I have tremendous respect with what's happening. And I feel like that is still very much at the infancy stage in the United States, in fact, affecting the banking industry. Our staff sort of like I start looking at AI as an opportunity to, let's say, potentially on the long underwriting side, when it comes to BSA you know know your customer due diligence and the analytical assessment or there are many different areas in terms of using AI can dramatically improve the process of handling transaction and whatnot that to me is a given because the technology have proven it can and do all of the above. It's just that it would take a bit more time for banks to appropriately apply AI to streamline and make that process more efficient and making sure not to skip too much and end up getting themselves in big problem in operating losses or whatnot. So that's a given. But on the other hand, I looked at it is that Do I know what's going to be happening in the next three or five years? I don't have the crystal ball. And the other thing is also my 30 some odd years in banking allow me the opportunity to go through that golden era back when internet was invoked. So if I look at internet in the 90s, I still remember, in 1992, when I was the CEO of East West Bank, I wrote a memo to all associates, and then I gave it to my secretary, typed it up, and asked her to make 250 Xerox copies, so that she doesn't want to have a mail guy delivered to everybody, to their inbox. That's how it worked in 92 but in 96 I have to all associate email I type it myself and that I still remember in 96 there were a lot of talks about there'll be no more branches in 25 years because digital banking will replace all banking I never believed that would happen but I absolutely believed internet was for real now internet was for real and today you look at what we're doing right now without internet i don't know how we could on earth we can survive i look at my iphone everything's in here right the fact is it changed behavior and increased productivity productivity in a big way it also that whole process sort out a whole bunch of wannabe but never quite make it yeah the Google still stay alive you know the Amazon doing great Meta's doing great but then a whole bunch of Pet.com, eToy and all these other stuff is all gone right so right now AI is going through exactly the same process there's going to be a few of them it's going to dominate but there is like thousands of these AI companies now hanging around in San Francisco paying high rent they're not going to make it that's what it is And then eventually, AI is going to be getting into our daily lives. That's going to make a big difference. You know, people talk about what robots would do. I've already seen what's happening in China. In the manufacturing plants, robots replace tens of thousands of laborers. It's already happening. The technology is already there. It's already applying that technology. It's not even, it would have been this, it would have been that. So I very much respect that direction, and the East-West Bank will take the position that we'll be a quick adopter that will watch out and will let Sam Altman and those guys do whatever they wanted to do, Elon Musk. Do whatever you want to do, right? Whatever they do, there will be something that's very applicable for the bank. make sure that somebody some pioneer banks who love to be the first one to get there let them test it out right after they test out get burned with cyber attack or whatever that is when that's done i'm coming in right coming in fast and that's the approach of east west so what i look at is that uh what of course we're going to have to spend some money and hiring the people who understand AI and whatnot, and then make sure that we beef up our information security area to make sure we don't get in trouble. But all in all, I don't expect East-West will be at the forefront to trying to be out there working with those big guns to develop anything. That's not our priority. That's not our job. You know, let JP Morgan do that. Yeah.

But maybe bring that, you know, 30 plus years of experience and you've seen how the landscapes evolved through various technology cycles. And one of the debates that we've been having here is around how agentic AI might impact deposit costs down the line, how stablecoin might impact deposit costs. Given your views early on that branches are not dead, that they will continue, how do you bring some of that experience into this debate and what do you think about it?

Yeah, again, my approach is that do not get stubborn and then refuse to change. I believe, I'm a strong believer that we need to constantly be changing and adopting to the new environment. That's what we do at EastWest. But while we're changing and adopting, we also not get too naive and then start getting so overly excited and exuberant about any new technology coming in and wanting to be the first one to get in there. Because my view is this, is that when I look at, for example, what AI would do, to what extent would cannabis deposit and then cosmic deposit rate goes up higher because now we've got genetic AI that comes in and automatically help you to move balances from your checking account to maximize your deposit rate and whatnot i look at it is that it doesn't take much iq that i look at my balances i have too much deposit i can move it too right so this whole idea is about that sort of stuff i don't think that it's going to be that big of a deal and again i'm talking about my long time experience 20 some odd years ago i remember when child swap and fidelity started that sort of like low-cost brokerage accounts right we all used to in the old days I had my Merrill Lynch account and I have to pay commission every time I do a trade and the commission was not cheap and then suddenly the child swap and fidelity is that are you can sue internet you go online you can do your own trade won't charge you much I won't charge you anything right and then the money market accounts there actually pay high rate did I see some outflow it's not just East West Bank every the entire banking industry saw some deposit get sucked out to fidelity and child swap and whatnot right that happened the industry overall banking industry strong a little but those who survive those who continue to sustain they put it healthy so I looked at it is that AI is gonna make some impact I don't know what it's gonna be but it's gonna make some impact it's gonna change the banking industry it changed the banking landscape one thing I do know is that like a bear chase we always went faster than everybody else so and that's the thought it is when it comes to like if you look at it when I first became sort of like CEO of East West Bank in the 90s there was a 13,000 banks and now it's like 6,000 something Down the road, it may be only 2,000. But as long as we always perform at the top quota, good. And that's what we're looking at.

So that brings me to a question on scale. And you spoke about how East-West would be a fast adopter as opposed to the leader in deploying some of these technologies. But how do you think about the impact of scale in an AI world and the ability to invest in these technologies over time?

In terms of scale, I think that we're always going to be looking at any kind of technology, whether it's AI or whatever else that come in, as long as it can help the bank to do the work with higher speed, higher accuracy, and help us to be more productive, we'll do it. And most importantly, we'll do it with the perspective about to what extent that would help our customer. Because East West Bank, ever since I've been involved with the bank, we have always been focusing on, we are a relationship driven and customer centric organization. We always follow that sort of like guiding principle, relationship driven and customer centric. so whatever that efficiency that will come in from the technology how does that help these two if it helps we absolutely embrace it and adopt it and put the resources on it but if it's helping us to be more transactional help helping us to be more internal driven and said we do whatever we do that may not necessarily be beneficial to the customers that doesn't work for us because our sort of guiding principle have helped us to go from a $40 million market value to today over 17 some odd billions, well, I think that something is going right. So therefore, I'll look at it as we're going to say continuous stay focused in that direction.

Got it. All right, perfect. So let's maybe pivot over to the competition. And, you know, one of the things that makes East West unique is focus on the Asian American community. How does your more focused client concentration insulate you from new competitors that are coming in?

Yes, in fact, we started with this Asian sort of affinity focus because the founders of EastWest Bank who found EastWest many years ago opened the bank in Chinatown Los Angeles because the Chinese immigrants in LA was not able to get banking services for mainstream bank and that's why they had to open their own bank so that was the origin of East West and so gradually when I came in and I took over I said no I'm not only going to be focusing on helping the Asian immigrants. In order to effectively help the Asian immigrants, East-West needs to break out and actively engage in the mainstream community. If we actually have more mainstream customers, the more that we have, the more we can help the immigrant customers that we brought in to further assimilate and reach out and enjoy the full citizenship of being American citizen. That to me is a much better calling than just tell these immigrants and say, stay in Chinatown, don't go anywhere. You don't need to be exposed with anybody. I, East West Bank, know your culture, know your language, I'll take care of you. That to me is not the right way to help out our customers to reach further. So that's why when I first joined East West, I changed the mission, vision, and be that bridge, and then continue to expand, and we've done exactly just that. Now, that said, as of today, our total asset size, 83 billion, 84 billion, so, is actually bigger than all the other Asian affinity banks in the entire country, all of them add up together. It's still smaller than us. so that's why obviously we have the great advantage because when it comes to supporting the Asian customers particularly in the retail consumer space we're so big our brand is so big and there is so much trust from our customers and they're the one that spreading the words we don't have to do a whole lot of marketing our customers are telling their friends they're telling their children they're telling their cousins who are migrating over that well when you come here just open the account at East West so it just makes it so much easier so that's why to a certain extent we continue to always outperform and now and that only works because most of the banks do not have a strong interest in focusing on our arena and I always worry about 20 some odd years ago is that wow one day HSBC just woke up right they didn't and they slept enough time and then they exit right so okay that's good I mean we'll just keep doing whatever we're doing and then so far so good and we think that we will have plenty of growth opportunity because that segment continue to be the fast-growing community and on top of it there are certain cultural affinity and so forth and that allow us to put in together products that really cater to their needs. Again, going back to the customer-centric principle, we build products that cater to their needs that allow them to comfortably enjoy the banking relationship with East-West. And we continue to grow in size so we can help them to grow. So when you think about growing in new geographies, I guess what drives your decision-making process there? what you typically what kpis you typically focus on yeah we we're focusing on metropolitan cities have a lot of let's say direct flight to asian country let's put it that way right because uh you know it'd be highly unlikely for me to open a brand like a branch let's say in uh jackson home wyoming and things like that right we are more into like so if you look at our geographic footprint today you know all the way in California from down south in San Diego all the way up to Sacramento in between San Francisco Silicon Valley LA Orange County and whatnot vibrant community with a lot of Asian Americans plus international flights allow us to do a lot of cross-border banking business and then to Seattle Boston New York Atlanta Houston Dallas Las Vegas, and then we have also loan production office in Chicago. So when we start growing, we'll be looking at these fill-in. And then if there are cities that we think that fit that criteria, we'll be obviously be interested to opening more branches there.

Got it. Okay. Let's talk about capital. And contrary to popular demand, I'm not going to ask the buyback question because I think you've been pretty clear that you will remain opportunistic there given your high capital levels. But maybe talk about, I guess, how do these high capital levels maybe help you get more client relationships and help you get more business? Is that part of the conversation? And how does that form part of the conversation when you show up to a new client? Absolutely.

I think that what I looked at throughout the last 30 some odd years We've done really well during time of prosperity. Like right now, the last few years, record earnings, record earnings, record earnings. But the time that we did best is when there were a financial crisis. So in 1991, when I made the acquisition of EastWest for a savings loan, there was a savings loan crisis. The minute I bought EastWest, I merely doubled the size of EastWest Bank because I went to RTC, the Resolution Trust Corporation, and bought these distressed SNL, right? And when I looked at 2009, global financial crisis, East-West doubled the size because again, we're in safe and sound position and have ample capital. And we got invited by the FDIC to acquire our competitor who even were bigger than us, that we're able to, again, make a huge impact by doubling our size. COVID, we have more time to do PPP loan for our customers, finish them in one week and have plenty of time to help the other bank's customers. That's why we grew our balance sheet substantially because many of those customers from other banks who didn't get help come to us. 2023, Silicon Valley banks, that, you know, March Magnus, we also benefit. But all of that is because East West Bank have so much capital that the customers feel safe to bank with us. We have to keep in mind that we are not the big four. The media have classified the big four, they are too big to fail. And therefore, no matter what they do, it doesn't matter. And the deposit is always safe. If you're not the big four, you have to every day prove to the customers that you are safe. And I'm not naive enough and say just because we have great, strong financial performance, that automatically give me the A grade from a customer standpoint. Customers have every right to be feared. They have $250,000 insurance deposit. And if they park five, $10 million at East West Bank, They have every right to be fearful, right? The only way I can prove to them is that, hey, look at my capital ratio. There's nobody out there have my capital ratio, tangible capital ratio over 10%. I would say, you go find a bank that can be bigger. And when we rationally discuss with the bank, that's why relationship banking is important. Customers of East West Bank would actually listen to us making a pitch to them. During that Silicon Valley banks crisis, We had to make our pitch because every day from Bloomberg, Wall Street Journal, they are spreading, you know, sort of like these rumors out there say all regional banks will be in trouble, right? If the second and third largest bank at California went down, how do you feel when you're the fourth largest bank? Rationally, the customers were concerned. And then we have to explain to these customers, the easiest way to explain is that, look at the financial performance of East-West. We make so much money. We have so much liquidity. Our capital ratio is so much higher. The last thing you need to worry about is East-West. And that's how we win customers. and we continue to be able to be in a position of strength. Now, I would look at it as if my financial performance really sucks and I perform on the average or even above the average level, I obviously would spend a lot of time thinking about the capital level.

But we're performing in the top quota all the time, right?

And I'm not putting too much attention to that, a bit of excess capital.

And then as you think about the Basel Endgame rules and the benefit that that has to capital issues as well, does that change how you think about allocating capital, whether it's in capital return or in capital deployment within the business?

No, because again, it's the same philosophy. That bit of excess capital, if it actually would, that excess capital would cause us to be not getting that kind of profitability, to be above our peers, I absolutely would need to do something intensely. just because we are extraordinarily shareholders friendly as a shareholder friendly bank and also I understand that we work for our shareholders I got to do what's right right but I'm giving these cash dividends increase year after year and then I am buying back it's just not buying back excessively I'm buying back opportunistically and I wanted to have some extra capital just in case who knows when's the next crisis coming right who knows where's the next potential in organic opportunities coming so I gotta look at all of that so all in all is more importantly is that we are in the top performing financial performance at this point and I look at it that those other stuff is not essential but even in terms of allocating capital within the business does it make more sense to say do mortgage or investment grade credit or anything else there i'll do whatever that makes sense for us to grow and then also make sure that we continue to keep it safe and sound and no concentration risk and so you look at it we keep diversifying diversifying our growth and we continue to make sure that we don't have over concentration risk and we are in the perfect time to sort of like strengthen our balance sheet by creating an even a stronger healthy east-west and that's what we're doing right now so so that on the rainy day we are substantially stronger than anybody else to take advantage of whatever opportunity there will come all right perfect with that we're out of time Dominic thanks so much for joining us