Good day. Welcome to the East West Bancorp 4th Quarter and Full Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Julianna Balicka, Director of Investor Relations. Please go ahead.
Thank you, Vaishnavi. Good morning, and thank you everyone for joining East West Bancorp's fourth quarter and full year 2022 earnings call with Dominic Ng, our Chairman and Chief Executive Officer, and Irene Oh, our Chief Financial Officer. This call is being recorded and will be available for replay on our investor relations website. During their remarks, Dominic and Irene will reference a slide deck that is available on our investor relations site. Management may make projections or other forward-looking statements which may differ materially from the actual results due to a number of risks and uncertainties, and management may discuss non-GAAP financial measures. For a more detailed descriptions of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic.
Thank you, Julianna. Good morning. Thank you everyone for joining us for our earnings call. I will begin the review of our financial results with slide three of our presentation. Our strong financial performance in 2022 was characterized by strong revenue growth, which was driven by strong loan growth and Net Interest Margin expansion in a rising interest rate environment, combined with disciplined expense management and solid and stable asset quality. Together, all these drivers result in industry-leading profitability both for the full year and the fourth quarter of 2022. East West achieved record earnings of $1.1 billion or $7.92 per share for the full year of 2022, an increase of 30% year-over-year. Our 2022 total revenue of $2.3 billion was our highest ever and grew 29% year-over-year.
Our Pre-Tax Pre-Provision income of $1.6 billion grew 40% year-over-year in 2022. We returned a 1.8% on assets and 21% on tangible equity for the full year. For the fourth quarter of 2022, we reported net income of $337 million and earnings per share of $2.37, which grew 55% annualized quarter-over-quarter. Our industry-leading returns were 2.1% on assets and 25% on tangible equity for the fourth quarter. Our fourth quarter Pre-Tax Pre-Provision profitability was nearly 3%. Let's go to slide four. Slide four presents a summary of our balance sheet.
As of December 31, 2022, total loans reached an all-time high of $48.2 billion, an increase of $771 million or 6% annualized from September 30. Fourth quarter average loan growth was likewise 6% annualized. Average loan growth in the fourth quarter was well balanced between our major loan portfolios of Commercial Real Estate, residential mortgage, and Commercial and Industrial. Total deposits were a record $56 billion as of December 31, 2022, an increase of $2.1 billion or 16% annualized from September 30. Fourth quarter average deposit growth was 7% annualized. Growth was driven by time deposits, reflecting a successful branch-based CD campaign during the fourth quarter. Our deposit book is well diversified by deposit type, and 38% of total deposits were in non-interest-bearing demand deposits as of December 31.
Our loan to deposit ratio decreased to 86% as of the end of the year from 88% as of September 30. Turning to slide five. As you can see in the exhibit on this slide, all our capital ratios expanded quarter-over-quarter. As of December 31, 2022, we had a Common Equity Tier 1 ratio of 12.7%, a total capital ratio of 14%, and a Tangible Common Equity ratio of 8.7%. Quarter-over-quarter, our book value and our tangible equity per share increased 6%.
I'm pleased to announce that East West Board of Directors approved a 20% increase to the quarterly common stock dividend from $0.40 per share to $0.48 per share, an equivalent to an annual dividend of $1.92 per share. The new dividend will take effect in the first quarter, payable on February 21, 2023 to stockholders of record on February 6, 2023. Moving on to a discussion of our loan portfolio, beginning with slide six. As of December 31, 2022, C&I loans outstanding were $15.7 billion, sequentially up 2% annualized and up 11% year-over-year. Our C&I portfolio is well diversified by industry and sector.
Slides seven and eight show the details of our Commercial Real Estate portfolio, which is well diversified by geography and property type and consists of low loan to value loans. Total Commercial Real Estate loans were $19.1 billion as of December 31st, 2022, up 8% annualized from September 30 and up 18% year-over-year. In slide nine, we provide details regarding our residential mortgage portfolio, which consists of single-family mortgages and home equity lines of credit. Our residential mortgage loans are primarily originated through East West Bank branches. I would highlight that 82% of our HELOC commitments were in a first lien position as of December 31st, 2022. Residential mortgage loans totaled $13.3 billion as of December 31st, 2022, up 9% annualized from September 30 and up 19% year-over-year.
I will now turn the call over to Irene for a more detailed discussion of our asset quality and income statement. Irene?
Thank you, Dominic. I'll start with our asset quality metrics and components of our allowance for loan losses on slides 10 and 11. The asset quality of our portfolio continues to be stable and strong. Quarter-over-quarter, criticized loans decreased 1% and the criticized loan ratio improved 5 basis points. Both classified and special mention loans decreased from already low levels as of September thirtieth. At year-end, the non-performing asset ratio was 16 basis points of assets, unchanged quarter-over-quarter. Charge-offs continue to be at low levels. During the fourth quarter, we recorded net charge-offs of $10 million or 8 basis points compared with net charge-offs of 6 basis points in the third quarter. Our allowance totaled $596 million as of December thirty-first, or 1.24% of loans, up from 1.23% as of September thirtieth.
During the fourth quarter, we recorded a provision for credit losses of $25 million compared to a $27 million for the third quarter. While asset quality remains strong and the current credit environment is benign, we continue to remain vigilant about credit. We are actively monitoring the loan portfolio and taking proactive measures to build our allowance for loan losses. Now moving to a discussion of our income statement on slide 12. This slide summarizes the key line items of the income statement, which I'll discuss in more detail on the following slides. Of note, amortization of tax credit and in other investments in the fourth quarter was $65 million, compared with $20 million in the third quarter. At the same time, the quarterly effective tax rate was 13% in the fourth quarter, compared to a 23% in the third quarter.
This fluctuation is due to tax credit investments that were closed in the fourth quarter and the related projects that were placed into service. This resulted in a lower effective tax rate and an increase in the amortization expense for the fourth quarter. For the full year of 2022, the effective tax rate was 20%. I'll now review the key drivers of our net interest income and net interest margin on slide 13 through 16, starting with average balance sheet. As Dominic mentioned in his remarks, fourth quarter average loan growth of 6% annualized was well balanced among our major loan portfolios and average deposit growth of 7% annualized reflected a successful branch-based deposit campaign. Our average loan to deposit ratio was stable quarter-over-quarter at 87%. Average non-interest bearing demand deposits made up 39% of our average deposits in the fourth quarter.
Turning to slide 14. Fourth quarter 2022 net interest income of $605.5 million was the highest quarterly net interest income in the history of East West, growing 39% linked quarter annualized. Our Net Interest Margin of 3.98% expanded 30 basis points quarter-over-quarter. As you can see from the waterfall chart on this slide, Net Interest Margin expansion in the fourth quarter reflected the impact of higher loan and earning asset yields, which increased the Net Interest Margin by 82 basis points, partially offset by 52 basis points of compression from the funding side. Our net interest income growth benefited from rising benchmark interest rates because of our asset sensitive loan portfolio.
To preserve net interest income when interest rates go down, we added $3.25 billion of swaps and callers in 2022, which included $1 billion added early in the fourth quarter. Turning to slide 15. The fourth quarter average loan yield was 5.59, an increase of 84 basis points quarter-over-quarter. The average loan yield comprised an average coupon yield of 5.53, plus yield adjustments, which contributed 6 basis points to the overall loan yield in the fourth quarter. As of December 31st, the spot coupon rate of our loans was 5.92. In this slide, we also present the coupon spot yields for each major loan portfolio for the last five quarter ends. You can see the positive impact of rising interest rates on each of the loan portfolios as loans have repriced.
In total, 61% of our loan portfolio was variable rate, including 30% linked to the prime rate and 27% linked to LIBOR or SOFR rates. I would also highlight that over 40% of our variable rate commercial real estate loans have customer-level interest rate derivative contracts in place. To clarify, this is distinct from the balance sheet hedging I discussed a minute ago. With the customer-level derivative contracts, we've helped our customers enter into loan-level interest rate swaps, collars, and caps currently structured to help protect customers against rising debt service costs. At the same time, the loans remain variable rate on our balance sheet and the bank benefits from the asset sensitivity. Turning to slide 16. Our average cost of deposits for the fourth quarter was 106 basis points, up 55 basis points from the third quarter.
Our spot rate on total deposits was 134 basis points at December 31st, a year-over-year increase of 125 basis points. This translates to a 29% cumulative beta relative to the 425 basis point increase in the target Fed funds rate over the same period. In comparison, the cumulative beta on our loans has been 58% as our loan coupon spot rate increased 248 basis points year-over-year. We started the rising interest rate cycle from a position of strength, with historically high levels of demand deposits for East West Bank and strong liquidity. This has bolstered the asset sensitivity benefits of our variable rate loan portfolio, supporting strong revenue growth through the cycle. We are pleased with the lag in deposit beta cycle to date. This has come through careful deposit cost management.
With a 29% cumulative beta cycle to date, we are outperforming prior rising interest rate cycles. With 39% of our average deposits in interest-bearing accounts, and with the growth that we have had in treasury management products and services since before the pandemic, we feel comfortable about continuing to navigate the current cycle well. Moving on to fee income on slide 17. Total non-interest income in the fourth quarter was 65%, down from 76% in the third quarter. Customer-driven fee income and net gains on sales of loans were $66 million, down 4.5% or 18% annualized from the third quarter and up 4% from a year ago. Year-over-year, we saw growth across most of our fee income lines of business. Moving on to slide 18. Fourth quarter non-interest expense was $257 million.
Excluding amortization of tax credits and other investments and core deposit intangible amortization, adjusted non-interest expense was $192 million in the third quarter, down 2% quarter-over-quarter or 7% annualized, driven by lower compensation and employee benefits expense. Once again, we generated strong positive operating leverage with total revenue growth of 27% annualized in the fourth quarter, plus a sequential decrease in expenses. The fourth quarter adjusted efficiency ratio was 29% compared to 31% in the third quarter. Our adjusted Pre-Tax Pre-Provision income grew 43% linked quarter annualized, our Pre-Tax Pre-Provision ROA was an attractive 2.95 in the fourth quarter. With that, I'll now review our updated outlook for the full year of 2023 on slide 19.
For the full year of 2023 compared to 2022, we currently expect year-over-year loan growth in the high single-digit % range. We expect production from all of our major loan portfolios in 2023. Year-over-year, we expect net interest income growth in the low 20% range, rate range. Underpinning our interest income assumptions is the forward interest rate curve as of year-end, which assumes a peak Fed funds target rate of 5% by April 2023 and a year-end Fed funds target rate of 4.75%, with a cut late in the year. In our modeling, we assume that deposit betas will continue to rise in 2023. Adjusted non-interest expense growth, excluding tax credit and investment amortization in the range of 10%-11%. We expect our revenue and expense outlook to result in positive operating leverage year-over-year.
In terms of credit for 2023, the provision for credit losses will largely be driven by changes in the macroeconomic outlook. We are providing our expectations for gross charge-offs, which are expected to be in line with our recent gross charge-off experience if macroeconomic conditions stay stable. For context, the gross charge-off ratio was 8 basis points in 2022 and 17 basis points in 2021. Asset quality today is excellent and the potential losses from any problem loans are limited. However, realistically, if the economic background weakens, we would expect to see some credit normalization from the very low levels today.
In terms of tax items, we currently expect that approximately $150 million of tax credit investments, excluding Low-Income Housing Tax Credit, will close and go into service in 2023, and therefore be part of our tax rate calculation for the full year. The tax credit amortization related to these tax credits should be approximately 95% of the tax credit investment amount for the full year. For the first quarter of 2023, we expect that $92 million of these tax credits will be reflected in the tax rate calculation. The tax credit amortization to be approximately $22 million for the quarter. There will be quarterly variability in the tax rate and the tax credit amortization due to the timing of tax credit investments placed into service. With that, I'll now turn the call back over to Dominic for closing remarks.
Thank you, Irene. In closing, 2022 was an excellent year for East West, with our highest ever earnings, revenue, loans, and deposits, and the achievement of industry-leading profitability metrics. Our annual earnings now exceed $1 billion. We look forward to 2023 with excitement as we celebrate our 50-year anniversary. The bank and our customers have come a long way since 1973. Throughout our history, the pillar of our success has been, and continues to be, our spirit of going above and beyond to service our customers. We are honored to be the bank of choice for our clients and wish to thank all our associates for their dedication and contribution to making our bank a success. Lastly, I want to take this opportunity to wish everyone a happy Lunar New Year.
May the Year of the Rabbit bring health, prosperity, and happiness to all of us. I will now open up the call to questions. Operator?
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Rochester with Compass Point. Please go ahead.
Hey, good morning, guys. Nice quarter.
Thank you.
Good morning, Dave. Thank you.
My first question is on the NII guide. On slide 16, you guys highlight the total deposit beta at 29%. You got 47% interest-bearing deposit beta through the end of last year. Was wondering what deposit beta you're baking into the guide at this point. I know you mentioned you expected deposit betas would rise through this year, but are you thinking mid-thirties or upper thirties for the overall cycle? Are you baking in something higher than that? Then how do you think about deposit growth from here and what that means for borrowing levels, which are still very low? Thanks.
Yeah, great question, Dave. At this point in time, we're modeling that full cycle beta will be 40% for 2023 and at the same time, for interest-bearing deposits, a deposit beta of 60%. That's factored in with our NII guidance that we have of the increase in the low 20%. Overall, I think with the good growth that we've had in deposits in general, along with our successful campaigns for CDs that are lower than, you know, other competitors in the market. You know, at this point in time, I think we'll be able to continue to fund our loan growth with the deposits. Certainly, though, we're very opportunistic and look at that from the perspective of cost.
Great. Just one follow-up on the back end of the year when you include your Fed rate cut. Was curious what you're expecting for the deposit cost movement as a result of that cut? Are you thinking that you'll get immediate benefit, or are you thinking there might be a little bit of a lag there with the first couple of cuts? Thanks again.
Yeah, I think it's so, it's so late in the year at this point, the expectation around that. We're not baking that in, Dave.
Great. Thanks.
The next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Hi. Good morning.
Morning.
I wanted to ask on the hedges that you've been putting on the books. Can you speak to, you know, how those might impact loan betas for both, the remaining of the rate cycle, the rate hike cycle, and also when the Fed begins cutting rates? You know, also how much more you plan to do on your hedging efforts from here?
Yeah, great question. certainly the specifics of how much that's impacted us quarter to date, I do not have that. you know, we can get you that information after the call. certainly as we started adding this, you know, fourth quarter, third quarter, there was a little bit of impact as far as the largely against the CRE loans that we've kind of hedged. we have $3.25 billion of swaps and also callers that we've put on. At this point in time, you know, in discussion with our ALCO committee, there's probably another couple billion that we would look to do, certainly we're opportunistic about this and also evaluating the overall balance sheet and the positioning of that.
That's something that we'll continue to evaluate to see what we think makes the most sense given the changes in the interest rate environment as well.
Got it. Is there, a bottom we can think about on NIM in the event that the Fed begins cutting, or is that too early to say right now?
I think it's too early to say. Yeah, sure.
Sorry, again. Fair enough. You know, in just on credit, in November, you emphasized, you know, like everyone else, you've been watchful for a normalization on credit, and you're focused on early detection of any cracks. In the reviews that you've been making, have there been any covenant breaches or any other cracks to note?
I mean, I think certainly on an individual loan basis that is happening, right? Overall, you know, I think we're very positive from the perspective that on credit, as we do continue to do these reviews on our commercial books, our consumer books throughout, you know, what's positive is there are not a lot of new problem loans. Same loans that we've been working through last couple years continue to be things that we work through, but not a lot of new problems in that process. That's certainly something that we feel is positive and positions us well.
Yeah. We've been actively managing the loan portfolio overall. As you can see in the criticized asset percentage, you know, it's relatively benign. So far, surprisingly, you know, asset quality is very, very, very good. We look at the rising interest rate, obviously that's why we've been aggressively managing the portfolio and see how it goes. I always do this ongoing loan review and so far so good.
The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead.
Hey, good morning.
Good morning.
Hey. I wanted to kinda touch again on the NII guide and in particular your outlook for the trajectory in the interest margin. It appears if the margin stays flat from 4Q levels, you could potentially hit the guidance just from that. I'm curious what your assumptions are as far as the trajectory in them going through the year and also with the forward rate curve assumptions?
Yeah. You know, I think at this point, my focus is really more on the NII, Ebrahim. We do expect when we look at our guidance, if you can tell, you can do the math of our guidance as well, that we do expect the NII to grow from the fourth quarter level. Depends really more about the fluctuation of what happens per quarter. Both we expect to be positive in 2023.
Okay. In regards to your outlook for deposit growth, what areas or what categories of deposits do you see most of that growth coming from? Could you talk more about your ability to kind of mitigate losses in DDA?
Great question. When we look at our deposit portfolio and our customers, one of the things that we benefit from is just the diversity of customers we have. Certainly, in order to, quite candidly, remain competitive, we had these deposit CD campaigns in the fourth quarter. We have one right now priced below market, but, you know, attractive enough rate and also six month duration. We don't want that to go too long. That is something that we continue to do. Relative to other kind of funding costs right now, we think it's attractive. It's also, you know, a customer base that stays with us and has a larger relationship with us. When we look for 2023 and where we think deposits are going to grow, I'd say across the board.
Although realistically, in this kind of rate environment, it's hard to maintain the deposit balances in the DDA accounts at the level that we had pre-rising rates. You know, we are still onboarding new customers all the time. Pipelines are strong on the deposit side. We are very kind of positive about what we're doing. The investments that we've made in treasury management, cash management, product services certainly are something that we're seeing a benefit today.
I wanted to highlight also, I think at the height of excess liquidity, which is during PPP time, you know, back in late 2020, because of COVID, we had like maybe went all the way up to close to 43% as a percentage of DDA to the non-interest bearing deposit to the entire deposit portfolio. 43%. Today we're down to 38%. As you can see, there was a lot of liquidity then. By nature, even without interest rate rising and so forth, you expect that these excess liquidity would not be sustainable. We are actually very, very pleased throughout the last few quarters watching our non-interest bearing deposit and see what the percentage stand.
It's kind of each quarter drop of 1 basis point and so forth. So far so good. We drop now to 38. It's still 38%. There's a lot of non-interest bearing deposits sitting there. By the way, the other part is that we continue to bring in new customers. We continue to bring new commercial customers. We're still onboarding this new relationship one at a time. In time, it will continue to grow the non-interest bearing deposit. It's just that there are some excess liquidity that in relationship what the market rate in terms of deposit it is today. Naturally, there are people who are moving some of the maybe excess excess liquidity they put into, what, a money market accounts or maybe CDs account and so forth.
That's why you see that there is some gradual reduction on non-interest bearing deposit balance. In terms of number of accounts, it keep going up.
The next question comes from Casey Haire with Jefferies. Please go ahead.
Yeah, thanks. Good morning, guys. Just wanted to follow up on the, on the loan growth outlook. Was wondering what you guys were assuming for utilization rates in your guide, and then any color on how loan pipelines are shaping up versus 9/30.
Yeah. At this point in time, we're not assuming a change in utilization rates, Casey. We're assuming flat from where we're at.
Okay, understood. On the credit quality side, you know, everything's still pretty benign and holding stable. I was wondering, is that true also for the $2 billion exposure in China, which obviously gets a lot of attention from investors?
China is even better. We've always have a very, very strong, you know, pristine, you know, loan portfolio. It's still exactly the same, you know. We feel that with the economy opening up, I think it was only gonna help us better. While we don't expect that there will be some sudden surge of loan origination in 2023, because, while the economy open up, it's gonna still take a little bit time for business to get back on track. It will probably benefit us more in 2024 than 2023.
The next question comes from Gary Tenner with D.A. Davidson & Co. Please go ahead.
Hi, good morning. This is Clark Wright for Gary Tenner. I don't want to beat a dead horse, but just in terms of the loan growth again, are you expecting it to be front-end loaded or more first sight across the quarters?
We're assuming that it isn't front-end loaded. That will be throughout maybe a little bit more in the latter half of the year.
Got it. The rest of my questions have been answered. Thank you. Great quarter.
Thank you.
Thank you.
The next question comes from Chris McGratty with KBW. Please go ahead.
Hey, good morning. Dominic, on capital, I think the dividend was a pretty strong signal, given how much capital you have and the position you're in. Is that the really the only capital return that you're contemplating right now, given the economy? I know you've been resistant to the buyback. Just wanted to see if there's any change in tone there.
Chris, I just want to interject. We have not been resistant to the buyback. We bought back $100 million last year.
Yeah, we did $100 million in the second quarter of 2022. We still have $254 million outstanding that we can execute anytime we want because it's been approved by the board last year. You know, we are very opportunistic in terms of the buyback. You know, you have to look at is that, you know, fourth quarter, we just racked up 25% return of Tangible Common Equity. So, we obviously is not one of those banks that really need to do this. However, we are always, you know, shareholders friendly. If we ever see that there's great opportunity, we absolutely will use the capital at the right moment.
I thought what we did in the second quarter for the $100 million was a great execution because at that time, with that price, sure, I would jump that right at it, you know. We have to be also be mindful. You know, one of the great advantage of East West Bank, you look at our capital ratio today, in this very kind of somewhat benign economic environment. We, because of the interest rates, that we are doing extraordinary well from a return of equity and return of asset standpoint. However, had this been a completely different economic situation, had it been like a 6%, 7% unemployment rate, interest rate were in a much higher level, that business were having trouble.
We, at that point, having this kind of capital, would absolutely give our customers much stronger confidence about why they wanted to be banking with East West than the others. I was always mindful of that. This has been doing really, really well for us back in 2008 and 2009 during global financial crisis. Somehow, somewhere, we just have a bit more capital than our peers. Ultimately, customers just feel more comfortable with us. We've always been very mindful of that. That's one key reason. The other thing is that we don't want it to not have some excess capital just in case if there are even potential acquisition opportunity and so forth, you know. We are very choosy in terms of potential acquisition.
However, you know, if there is something available, we're always ready to execute. All of that, you know, is a combination of multiple factors that cause us to be where we are today. One way or the other, we are very comfortable where we are. If it ever in a situation that we feel that the stock price or whatever the other reason that we feel or maybe somehow there's not enough of a confidence of growth that we may want to do some buyback, we absolutely will step in. We'll do the right thing. You can count on that.
Yeah. Thank you. Thank you for the perspective. Thanks, Dominic. Just, I do want to ask the tax rate. I'm not the tax expert, but I want to make sure I understand the cadence of the amortization. Irene, you said roughly 95% of the $150 will flow through the M line. That's like a little over $140. I think the Q1 is a little over $20. Can you help us with the tax rate? Because it looks like amortization last year was a decent amount lower and the tax rate was 20%. I'm coming to a tax rate kind of, you know, mid to upper teens based on this guidance. I just want to make sure I don't make a mistake. Thank you.
Hi, Chris. This is Julianna. In terms of the tax rate, it will vary depending on your assumptions for pre-tax income, which will vary with your assumptions for provision for credit costs obviously. In terms of the tax amortization on the full year basis, when you look at that $150 million of tax credits, think of it as a 95% of that will go into the tax credit amortization. However, we booked amortization when the credits close and go into service. Therefore, for what's on the docket for the first quarter, that's $22 million. That means amortization rate in quarters two, three and four will be higher in order to come up into that full year 95% number as credits close and go into service.
We wrote in the slide deck that for the first quarter, $92 million of tax credits will be in the tax rate calculation and that will go on up through the year. I can follow up with you offline for a more detailed calculation if you like.
The next question comes from Jared Shaw with Wells Fargo. Please go ahead.
Hi, good morning. Thank you.
Good morning, Jared.
You know, I guess when you look at the moves you've made with swaps and collars, and the potential to add more, is your goal to get, you know, to sort of eliminate all that asset sensitivity earlier or much of that asset sensitivity earlier, in 23? Or how should we be thinking about just your general asset sensitivity positioning over the first few quarters?
Yeah, great question. You know, I would say that that isn't our goal, Jared, to remove our asset sensitivity. What we wanna make sure is that when we look at the balance sheet and the loan portfolio, that, we are able to evaluate what we think is might happen, hedge kind of risks that we see from an interest rate perspective. We still expect to be asset sensitive even with these changes that we're making.
Okay. My follow-up. Any outlook on the fee income lines, and you know, what you're seeing in terms of potential for growth there among the different lines?
Yeah, great question. On the fee income, I would say that if you break that down as far as things that are within our control, things that have to do with investments that we've made, growth that we see with our customers, you know, that's going great. Going great. Market kind of driven factors, things that maybe we don't have a control over, I think that's going to continue to be challenging, especially if you look at it from the perspective of mark-to-market on the derivatives and then also FX and that balances around. Aside from that, we expect that, you know, from a core customer perspective and the growth perspective, we will still see those increases.
The next question is a follow-up from Ebrahim Poonawala with Bank of America. Please go ahead.
Hey, thank you. I guess just wanted to follow up on China in terms of, one, given the reopening that's underway in China, does that create maybe stronger growth opportunities as we think about this year? How are you thinking about allocating more capital to that business? I appreciate a lot of that business is kind of cross-border and there's cross-border connectivity, but would love to hear if there are increased growth opportunities emerging in China. Also, Dominic, would love to hear your views means as is now the Chair of APEC, like, how do you see that relationship evolving and creating more opportunity for the bank given its strategic positioning? Thank you.
In terms of the opening of China is not just a post-pandemic opening that the ability to travel in and out of China, and so to help, you know, foreign investments to feel at ease about not having the restriction to do quarantine and so forth. That's actually a big factor because many of our management team have not been back to China for the last two or three years. I think that likewise, the same thing for many of the business who around the world who are doing business in China, they were restricted by that. With this opening up, I think that's a huge factor that helps substantially. That's one.
The second part is really the Chinese government new policy towards business. Obviously, the last two or three years, the business sectors were having some hard time, whether you're in social media, high tech, you know, video gaming, you know, entertainment, real estate, education, you name it, every one of these sectors were hammered because of a much more challenging policy or regulation that came up that hindered their ability to grow. Now, it just for the last few weeks, things turned in a completely different direction. Government are providing support to the real estate sectors. They are also really getting much more business friendly to these other industries, et cetera.
With that, we also see that foreign investments are getting their license approved and getting their, let's say, additional investment to get majority shares, also, sign off and so forth. We do see that at this stage, the business opportunity is much better. Reflected on East West Bank, we have always traditionally been mainly focusing on cross-border business. I think that with this additional opening up and the more business friendly kind of policies, clearly it would encourage cross-border business. Please keep in mind that despite the From the U.S. side, that we can see that maybe the attitude towards China has not improved.
On the other hand, we ought to keep in mind is that the business that have been restricted are usually related to national security issues, they're highly sensitive or maybe some very, very high level technology or biotech type of business that quite frankly, that East West really do not have anything to do with. Our focus is on these very, very common, like electronics, garments and business items that import, export, or investment to both shores that to the consumer market and etc., that are not related to national security issue. We do feel that there are plenty of room to grow. You know, even during the pandemic when China literally was shut down against by the borders, we still find way to grow our loans. We still bring in additional new customers.
We expect that to continue to grow. I don't think that East West will be an organization that just because of this new opening, that we will just rapidly trying to push a lot of capital in there. We're gonna continue to stay steady, and we'll continue to be observing the market and make sure we make the wise choice. I expect that in terms of a sustainable growth opportunity in the Greater China region, and also particularly, as you mentioned, throughout Asia, we feel pretty confident that that will be something that we expect a good opportunity going forward. The Chinese business also have expanded into Southeast Asia, whether it's Vietnam, Thailand, Indonesia, Malaysia, et cetera.
We expected that many of our customers will continue to migrate their business into those regions, which will be beneficial to us. That's also the reason why we opened a rep office in Singapore. We will continue to evolve and expand into Asia and to make sure that we can effectively grow this business model as the bridge between the East and the West.
That is helpful. Thank you so much.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks.
Well, I just wanna thank you all for joining us for the call today. We feel really good about where we are today in 2023, and we'll continue to march forward. Looking forward to the call with you all in April. Thank you.