Chart 27: Where do you see Citicorp’s efficiency ratio settling in 2017?
80% 70% 60% 50% 40% 30% 20% 10%
0%
Below the 58% reported YTD in In-line with the 58% reported Above the 58% reported YTD ‘16 YTD in 16 in 16
Source: BofA Merrill Lynch Global Research
East West Bancorp (EWBC), B-1-7, Buy 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 SIF! 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.
= _EWEBC 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% 10%
0%
Makes me cautious, Makes me bullish, as Makes me cautious, Does not matter much,
especially given the China provides an givenaslowing given EWBC’s earnings
anti-trade rhetoric in attractive growth Chinese economy are far more levered to
the run-up to the US opportunity the US economy elections
Source: BofA Merrill Lynch Global Research
= EWEBC 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.
Bankof America a 2016 Future of Financials Conference | 17 November 2016 17 Merrill Lynch
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