Profits at East West Bancorp in Pasadena, Calif., surged in the fourth quarter as strong commercial, multifamily and residential loan growth helped drive a 16% gain in net interest income.
The $41 billion-asset company reported net income of $173 million in the quarter that ended Dec. 31, up 35% from the same quarter a year earlier after adjusting for the impact of the federal tax overhaul passed in late 2017.
Total loans increased 11.5% year over year to a record $32.4 billion. Commercial and industrial loans climbed nearly 13% to $12.1 billion, multifamily loans rose 19% to $2.3 billion and residential mortgage loans increased 30% to more than $6 billion. Those double-digit gains more than made up for declines in construction loans and home equity lines of credit.
The loan growth combined with widening yields on loans to boost net interest income to $369.4 million, up from $319.7 million a year earlier, and to increase the net interest margin by 22 basis points year over year, to 3.79%.
The company, which has operations in the U.S. and China, said Thursday that it expects loans to increase by another 10% in 2019.
“We look forward to the new year with confidence,” Chairman and CEO Dominic Ng said in a news release. “With our presence in the U.S. and Greater China, we have built cross-border banking expertise that differentiates us from other banks.”
The strong loan growth helped to offset higher deposit costs stemming from rising interest rates and relative weakness in fee income. Noninterest income increased just 1.4% year over year to $38.9 million as wealth management fees were flat and loan and deposit fees declined.
The bright spot in noninterest income was in letters of credit. Fees from letters of credit climbed 64% in the quarter to $16.4 million.
Shares of East West were up 2.6% in early trading Thursday to $51.58.
