Fannie Mae, Freddie Mac shares tumble after conservatorship comments
East West Bancorp (NASDAQ:EWBC) delivered record quarterly revenue and net interest income in its second quarter of 2025, according to the company’s earnings presentation released on July 22, 2025. The regional bank reported net income of $310 million and diluted earnings per share of $2.24, showing continued momentum from its strong first quarter performance.
Quarterly Performance Highlights
East West Bancorp achieved record quarterly revenue of $703 million, up from $693 million in the first quarter. Net interest income reached a record $617 million, increasing from $600 million in Q1. The bank maintained its net interest margin at 3.35%, unchanged from the previous quarter despite a challenging interest rate environment.
"We entered the second quarter with a diversified balance sheet, a granular and strong consumer and commercial banking network," CEO Dominic Ng had noted during the previous quarter’s earnings call, a strategy that appears to have continued yielding results.
The bank reported a return on average common equity of 15.4% (16.7% adjusted return on tangible common equity) and a return on average assets of 1.62%, demonstrating strong profitability metrics.
As shown in the following financial highlights chart:
Deposit and Loan Growth
East West Bancorp reported balanced growth in both loans and deposits, with each increasing by 2% quarter-over-quarter. Total (EPA:TTEF) average deposits reached $63.7 billion, representing a 9% year-over-year increase. The growth was broad-based across deposit categories, with internet banking checking and savings accounts showing the strongest growth at 5%.
The deposit growth breakdown by category illustrates the bank’s diversified funding base:
On the lending side, total average loans grew to $54.3 billion, a 5% increase year-over-year. Commercial and industrial (C&I) loans led the growth with a 2% quarter-over-quarter increase ($362 million), followed by residential mortgage and other consumer loans at 1% ($209 million). The only category showing a slight decline was multifamily loans, which decreased by 1% ($29 million).
The loan portfolio’s growth trajectory is visualized in the following chart:
Detailed Financial Analysis
East West Bancorp’s net interest income growth of 3% quarter-over-quarter came despite a $6 million negative impact from cash flow hedges, which reduced the net interest margin by approximately 3 basis points. The bank noted that $1 billion of forward-starting hedges will come online in the second half of 2025, with a blended receive-fixed rate of approximately 4%.
The bank’s interest-bearing deposit costs continued to trend downward, reaching 3.25% by the end of Q2, compared to 3.30% at the end of Q1 and 3.92% a year ago. This improvement in funding costs has helped maintain the bank’s net interest margin despite competitive pressures.
The following chart illustrates the net interest income and margin trends:
Fee income reached $81 million in Q2, representing a 5% year-over-year increase. The largest contributors were commercial and consumer deposit-related fees ($27 million), followed by lending and loan servicing fees ($25 million). Foreign exchange income ($14 million), wealth management fees ($11 million), and customer derivative income ($4 million) rounded out the fee income sources.
The bank’s fee income composition is shown here:
Asset Quality and Risk Management
East West Bancorp reported improving asset quality metrics in Q2 2025. Criticized loans decreased by 14 basis points quarter-over-quarter to 2.15% of total loans held for investment. Nonaccrual loans declined by 3 basis points to 0.25%, and nonperforming assets stood at just 0.22% of total assets.
Net charge-offs for the quarter were $15 million, representing an annualized rate of 11 basis points, unchanged from the previous quarter. The bank increased its allowance for loan losses to 1.38% of total loans, up from 1.35% in Q1, reflecting changes in the economic outlook.
The following chart details the asset quality trends:
The bank’s allowance for loan losses increased by $25 million during the quarter, driven primarily by changes in the economic outlook. The increase was particularly focused on the C&I portfolio to capture potential effects of the business cycle.
The allowance for loan losses trend is illustrated here:
Capital Position and Shareholder Returns
East West Bancorp maintained strong capital ratios, with a tangible common equity ratio of 10.0% and a Common Equity Tier 1 (CET1) ratio of 14.5%. These metrics position the bank well above regulatory requirements and provide flexibility for both organic growth and potential capital returns to shareholders.
The bank declared a third-quarter 2025 dividend of $0.60 per share and repurchased $2 million worth of shares during Q2. Management indicated that the bank has capacity for ongoing share repurchases, reflecting confidence in its financial position.
The capital strength metrics are visualized in the following chart:
Forward-Looking Statements
Looking ahead, East West Bancorp updated its full-year 2025 outlook, projecting end-of-period loan growth in the range of 4% to 6% year-over-year. The bank expects net interest income and total revenue to trend above 7% growth for the year, with an effective tax rate of approximately 23%.
Management continues to emphasize its expectation of delivering "top quartile returns" and maintaining "best-in-class efficiency" in the industry. The bank’s efficiency ratio remained steady at 36.4% in Q2, highlighting its operational discipline.
East West Bancorp’s diversified loan portfolio, with 70% supporting commercial customers (32% C&I and 38% CRE) and 30% in residential mortgage and other consumer loans, positions it well to navigate various economic scenarios. The portfolio benefits from conservative underwriting, with average loan-to-value ratios of 49% for commercial real estate and 50% for residential mortgages.
The bank’s stock closed at $108.40 on July 22, 2025, up 0.52% for the day, though it showed a slight decline of 0.83% in after-hours trading following the earnings release. With a market capitalization of approximately $14 billion, East West Bancorp remains a significant player in the regional banking sector, particularly for clients seeking cross-border capabilities between the United States and Asia.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.