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Chart 27: Where do you see Citicorp's efficiency ratio settling in 2017?
80%
70%
60%
50%
40%
30%
20%
10%
0%
71%
21%
9%
Below the 58% reported YTD in '16
In-line with the 58% reported YTD in '16
Above the 58% reported YTD in '16
Source: BofA Merrill Lynch Global Research
East West Bancorp (EWBC), B-1-7, Buy
Π
Sentiment post-election appears constructive on regulatory relief. CEO
Dominick Ng noted that the industry could be positively impacted should aspects of
Dodd-Frank, which have been both challenging and taken up significant internal
resources (even for banks below the $50bn SIFI asset threshold), be reformed.
Specifically, Mr. Ng believes the pace of expense growth could likely slow. That said,
he noted the possibility to shift some of these expense savings to revenue
generating areas.
EWBC sees limited impact from anti trade rhetoric during the run-up to the US
elections. Although recent political rhetoric on China has had a negative bias, Mr.
Ng believes these views are primarily focused on the traditional-manufacturing
Chinese industries vs. the country's current strategic emphasis on tech and
consumer/retail. Despite having only a 4% exposure to Greater China (includes Hong
Kong), EWBC benefits from its unique positioning, both as industry experts in
parallel industries and as a relationship bank. Investor sentiment agreed; with 86%
of the audience polled have a bullish view of EWBC's China exposure.
Chart 28: How does China exposure impact your investment thesis on EWBC?
50%
40%
30%
20%
14%
10%
0%
43%
43%
0%
Makes me cautious,
especially given the
anti-trade rhetoric in
the run-up to the US
elections
Makes me bullish, as
China provides an
attractive growth
opportunity
Makes me cautious,
given a slowing
Chinese economy
Does not matter much,
given EWBC's earnings
are far more levered to
the US economy
Source: BofA Merrill Lynch Global Research
EWBC reiterated its strategy to sell CRE loans in favor of portfolio
diversification. Although Mr. Ng expressed caution on the overall commercial real
estate (CRE) market, he noted seeing little tangible signs of concern within EWBC's
footprint. That said, EWBC could continue to look to sell CRE loans in order to keep
the loan portfolio balanced and thereby limit the reliance on any one segment. Note:
CRE concentration was 261% of risk-based capital as of 3Q vs. 265% in 2Q.
Bank of America
Merrill Lynch
2016 Future of Financials Conference | 17 November 2016 17
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