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EWBC to maintain capital for organic growth opportunities. As of 3Q, EWBC's
CET1 ratio was 10.9%. While EWBC isn't opposed to using excess capital for an
acquisition (depending on the market landscape), Mr. Ng prefers to use capital to
support organic growth opportunities and the dividend (1.75% div yield). With
respect to share repurchase, EWBC seemed less enthusiastic to buy back stock at
current valuation levels (2.3x TBV).
First Hawaiian (FHB), C-2-7, Neutral
• Positive outlook around the Hawaiian economy. Chairman and CEO Robert
Harrison and CFO/Treasurer Michael Ching were optimistic with regards to the
outlook for the Hawaiian economy, particularly around tourism trends. While the
recent strength of the dollar could impact the inflow of foreign tourists (with Japan
and Canada the key foreign markets for HI) to the island, management noted that
the potential for an increases in domestic tourism could help offset the pressure
from any slowdown due to a stronger USD.
• Positioned well for higher rates. With regards to its outlook on the impact of
potentially higher interest rates, management noted that it remains asset sensitive
with 60% of its loan portfolio floating rate. On the funding side FHB expects the
deposit beta to remain low given the competitive dynamics in the Hawaii landscape.
Management anticipates that another 25bp increase in the Fed Funds rate in
December could have a similar impact on the NIM (+6bp) as it experienced
following the previous rate hike in Dec '15.
• Cash deployment to securities completed. Management noted that it has
completed the liquidity actions that it planned to take from deploying excess cash
into its securities portfolio and the full impact of this should be visible in 4Q
results. Note the securities portfolio duration is 3.3yrs at the end of 3Q16.
Management noted that it prefers to keep $400-500mn at the Fed in cash liquidity.
• Continued focus on maintaining dividend payout. In terms of capital
management, management reiterated that it would like to maintain a healthy
dividend payout. Given that additional capital return from buybacks are limited due
to the Fed's CCAR process (which FHB is subject to given that it is part of a larger
holding company owned by BNP), management intends to increase its capital
payout to shareholders (via higher dividend and buybacks) over time.
• Expenses to stay relatively elevated in near term. During the audience poll, when
asked about what management should prioritize in 2017, 38% of the investors
polled noted that they would like management to manage core expense growth
while 31% would like management to increase the dividend payout to over 50% of
earnings. Management noted that the efficiency ratio would likely trend around
50%, modestly higher than the 48.5% it reported in 3Q as it incurs additional public
company costs ($14.5 – 17mn of expenses), but over time should move back below
in the mid-to-high 40s.

18 2016 Future of Financials Conference | 17 November 2016
Bank of America
Merrill Lynch
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