East West Banking Corporation (EW) Earnings Call Transcript & Summary

Great day, everyone, and for those of you who joined us this morning or the previous virtual sessions, welcome back. We are currently streaming on Bloomberg's event platform and are live broadcast via the Bloomberg terminal. The Philippine Stock Exchange and Bloomberg are excited to host all of you over 3 days on the PSE STAR, Strengthening Access and Reach, Investor Day. To those of you joining us for the first time, this 3-day event gives all of you an access to 10 listed companies' financial highlights, growth strategies and market opportunities and Bloomberg analyst's economic and sectorial outlook. I'm Lisa Lee, senior industry analyst, ASEAN Consumer & Industrials for Bloomberg Intelligence based out of Singapore, and I'm excited to open our third and final afternoon session. This morning, my Bloomberg Intelligence colleague, Sarah Jane Mahmud, shared her outlook and we featured 2 listed companies, BDO Unibank and Philippine Business Bank. This afternoon, I'm excited to share my research insights and also welcome 2 featured listed companies, East West Banking Corp and GT Capital Holdings. Before we get started, a few housekeeping items. Firstly, if you experience any issue with your audio or video during the broadcast, please simply try refreshing your browser. [Operator Instructions] So now let's get started with our first featured company this afternoon, East West Banking Corp. Please welcome to the virtual stage, Jerry Ngo, Chief Executive Officer. Jerry, over to you. [Presentation]

Thank you, Lisa, and good day, everyone. My name is Jerry Ngo, I'm the CEO of East West Bank. And please indulge me when I start my presentation by saying that I truly believe that East West Bank remains to be the best bank proxy to the Philippine consumer story. Today, I'm very happy to report to you that we grew our consumer loan portfolio by 22% year-on-year. This now accounts for around 82% of our total portfolio. More than that, we've also maintained a competitive deposit franchise. Our CASA level now stands at around 77%, which compares very favorably with the industry's 71%. Our CASA grew by 5.6% versus the industry's 5.1%. In line with this, we have also expanded our customer base, which now stands at 2.6 million. We have generated solid core income growth. This sustained our growth by around 28% year-on-year despite the expected increase in funding costs. We managed to do this by rebalancing our loan portfolio towards segments that had higher optimal returns. For this half of the year, we had minimal reliance on trading income. But as they say, we're not also opposed to taking opportunities as they come, and in fact, we've already started to see that in the second half starting with the month of July. We are scaling up efficiently, gradually improving our operating leverage. The benefits of our debt investments are starting to bear fruit, but they're still in progress and I'm still expecting a lot of them to really come to fore in the next months and years ahead. We continue to be prudent in terms of sufficiently providing for potential losses, all the while maintaining our industry-leading margins. This is very, very important for us as we are right smack in the consumer lending space. Parallel to this, we are building the foundations and this is, I think, more important, a foundation for an accelerated growth for the bank. We've improved our digital platforms. We've launched our new mobile app. Our current digital penetration stands at 33%, and we're looking to do more of that going forward. We achieved an appropriate workforce level. And we've deepened our management team, and this is very critical as we need new skills, new capabilities that will then propel the bank forward. Our balance sheet is structured in line with the consumption-led economy, and that's where the Philippines is at this point in time. And in light of the easing monetary policy, so if you -- for those of you who are following, the Central Bank had just announced a 25 basis point rate cut yesterday. Your bank, East West Bank, will stand to benefit from wider margins in our core income and, of course, from the opportunistic volatility that comes in it with regards to our trading income. So this thing actually bodes fairly well for ourselves. Our net income for the first half of 2024 stands at PHP 3.5 billion. This is 6% higher than last year's. But what's more important is that this is driven solely by our core revenues of net interest income and fee income today is growing by around 28%. Trading was muted in the first half of the year as market volatility erased some of the gains that we've had early on. But I've already started, as I mentioned earlier, to see some of these gains starting July onwards. Our operating expenses grew by 22%. And if you notice, this is a slower rate than the pace of our core revenue growth and that's very good because we want to maintain that positive jaws as we move forward with our growth trajectory. More importantly, this is driven mainly by expenses that are directly related to growing our balance sheet, such as capabilities building, business-related expenses as well as upfront investments in technology. While we are still far from where we want to be in terms of efficiency, we know that these investments are really necessary to take us forward and we're making those investments now. Meanwhile, our bancassurance business, our joint venture with our Belgian partner, Ageas, has contributed close to PHP 200 million in the first half of the year and this is expected to complement our income streams going forward. Overall, pre-provision profit -- or pre-provision operating profit stood at PHP 8.9 billion, 30% higher year-on-year from sustained widening of operating leverage. Our cost-to-income ratio improved to 57% this year, 1% down from last year's 58%. And that gets us -- even if we are a consumer banking predominantly focused bank, that keeps us pretty close to the industry average. We continue to be prudent and set aside sufficient provisions for potential losses as we grow further into the businesses that we're focused on. I think what's more important is to really look at it in terms of net income minus the impact of trading. And when you compare our 2023 and 2024 year on -- year-to-date, it would show that we've grown by 16% year-on-year growth. I'm also glad to share with you that our margins have widened despite the expected elevated funding costs, a phenomenon that we've not only noticed in the Philippines, but across the global banking landscape. And this led us to rebalance our loan portfolio towards higher yielding businesses to compensate for the increasing interest expenses. But on top of that, we've also instituted operational efficiency initiatives to ensure that our long-term profitability are really [ enshrined ]. We continue to develop our stable, low-cost funding base, though more recently the growth trends show that we are also not immune to the challenges that are being faced across the industry. Hopefully, the rate cuts the have started to happen, particularly here in the Philippines, would bode very well for us. To further illustrate the improvement in our margins relative to past years, first half interest income ended at around PHP 20.8 billion, while interest expenses ended at PHP 4.2 billion. Now simply running rate this by just totaling these numbers would get to your full year estimate. And this will highlight that interest income generation is still much larger than the interest expense growth. With the rate policy cut that was announced yesterday, the bank stands to even benefit further from margin expansion due to our earnings assets being largely fixed, which normally would benefit from a declining interest rate environment. A quick cursory analysis from our side earlier today would show our estimate is such that a 25 basis point policy rate cut could translate to around 5 to 10 basis points in terms of improvement in our net interest margin. Now this sustained margin expansion is mainly because of our high revenue-generating balance sheet. It is an actualization of our barbell strategy, something that I had presented to you here on this same venue last year. We've grown our consumer loans by 22% year-on-year and it now stands at PHP 260 billion, making up around 82% of our total portfolio. This was led by credit cards, which is now at around PHP 61.3 billion or 19% of our total loans. Cards business grew by 34% last year. What is actually more important is that the growth has been widespread and across all our other asset classes. Notable would be the growth in personal loans, which grew by 54%. Our auto business, despite already having a sizable portfolio, grew by 22%. And our salary loan business actually grew by also 17%. So it's really right across the board. However, also, what's more important is to showcase that on the other side of the barbell is the funding. And in this area, we remain to be competitive in generating low-cost CASA that will support our asset growth. Some of the initiatives that we've done this year is that we've expanded our wealth management business. Many of you may have remembered that we've acquired this from Standard Chartered Bank as part of the acquisition that we did from their consumer bank portfolio before. Now this has grown. We are now covering more cities outside of Metro Manila. In fact, we have now one of the widest coverage of priority banking centers relative to our peers, and we intend to expand this further. We believe that the emerging affluent is also a key to unlocking the opportunity in the Philippines. We've launched a new offering for professionals and business owners, we call it East West Business Class. It's aimed at providing solutions for our clients' personal business as well as their professional needs. Underlying all of this, we also continue to enhance our cash management offerings, now expanding that into ecosystems and supply chains solutions, and this is really important in order for East West Bank to continue to be our customers' preferred operating account. Not just net interest income, but also the fact that fees have also gone up in line with this growth in our customer base, but also in terms of our loan portfolio. Our other income also grew by 27% on the back of the increased lending and other banking transactions. Case in point in this is that our credit card business accounted for around 43% of this fee income and it amounts to around PHP 1.2 billion last -- for the first half of 2024. As I mentioned earlier, trading income was lower as of June as interest rates in the second quarter rose abruptly. This has since recovered and presents an opportunity for supplementary revenues in the coming periods as rates come down further, and as you've seen, volatility has increased quite recently. Let me go back to our barbell strategy. What we wanted to do and we needed to do initially was really to bulk up our organization in order for us to be able to stand up to the challenge. And that's what exactly we just did. We needed to bulk up and we spent in order to rapidly grow and scale up our business. Most of our expenses work towards continuously growing the business towards a particular scale. We believe that for some of the asset classes we'll reach it and for the others we are continuing on that path. Our workforce expansion has since stabilized. It has now also gone to a good level where, I think, we have the right skill sets in place. And we're now looking at ensuring that we have the right levels of attrition, but also the skill sets that are coming in to join the bank in order to prove and support that agenda going forward. We've deepened our management team, and this is really important as a recognition that we need the right skill sets to really help us to push forward. To name a few, and with your indulgence, let me go through them very quickly. We have onboarded a new Chief People and Corporate Services Officer, someone who will help me with my agenda with people, but also to help put together the organizational culture. And that's really something that I think has already gained some level of traction. We've also been joined by our new CFO who comes and brings with him more than 30 years of experience in banking and finance having previously held similar positions in both local as well as foreign banks in the country. Our new Marketing and Cash Management Services Head and also join us, again, from foreign as well as local banks as well as in tech companies as well as in other sectors. So it's very, very exciting to have someone who has a very diverse experience with regards to the area. As you know, banks are always all about governance, regulatory compliance and such and I think that's going to be equally important as we grow and manage sustainable growth. Governance has always been an important factor in our business. So with that in mind, we've established an enterprise oversight office. It's headed now by a seasoned and former regulator, in fact, the Chief Audit Officer Executive of our regulator. And this is really in recognition as part of our commitment to further strengthen the bank's governance. And we hope that this stance will help us as we go forward in our journey. We are also very fortunate to have with us our new Technology Transformation Head, someone that I knew from my previous stints in Standard Chartered Bank really. But really what's important is that he also -- brings with him a lot of experience in terms, not just in banking, but also in fintechs. He's built his own technology, core banking stack, from scratch or from a framework and he's also been exposed in terms of the different banking capabilities, not just in the Asia Pacific region, but also Middle East and partly the West. So really excited about what we can do by bringing all of these people together. We've consolidated our products and channels, particularly on the digital front. We have announced our Chief Digital Product and Channels Officer, someone who's worked with us with the development of our Komo app. That's someone that I think we are looking forward to help lead us in the charge on digitalization, particularly as it affects customer [ dealings ]. Last but not least because there are others, and I do not have the time to do this, but I also want to highlight that we put together our strategy and transformation office, and that's being held by one of our executives but also a Director of the Board. And I think that's very important because it will then help me to drive the architecture but also the execution of the bank's road map, delivering strategic initiatives towards customer experience, but also making things happen. So really excited with a group of people that we have brought with us together, particularly as it stands in the senior management team. But we didn't stop there. We also looked at how do we ensure with regards to upskilling our people, with regards to the new technology. And I think it's very important that we've put in place projects, programs and initiatives that focuses on broadening our functional and accelerated development, particularly with regards to up and coming things like AI, RPAs, data science and like. We've also conducted development programs. We continued our corporate banking development program, retail banking development program, but more importantly, for me, personally, is we've launched our first graduates of our management development program for this year that will become the core basis of our generalists that will help the brand in the future. So really excited to have seen this. And I think more importantly, we've also invested quite a fair bit in terms of people-centered leadership and values as far as the organization is concerned. So lots of things being done in terms of preparing your bank for accelerated growth in the future, not just in terms of technology, product, but in terms of the basics, which is really underlying capabilities of our people. Please allow me to transition and have a bit of an overview on our digital platforms. I think East West Bank has a very interesting suite of digital products and services that I think, if positioned really well with our segments, would bring the benefits in terms of preference and options to our targeted segments. What I'm showing you here is a set of our capabilities. We start off on the left with Komo, which is being positioned now as for low-value, large-volume day-to-day activities, right? Similar to a wallet, that's something that we're really repositioning and we're making that available to all our clients. After Komo is ESTA, which is the country's only full service banking chatbot, right? This is something that we're very proud of. It's recently won an award, which I'll share with you later. But it's also being enabled with an AI large language model. And between the two, Komo and ESTA, we believe that there are certain opportunities of being able to engage our clients in a less structured way. Let me also provide certain new innovations. So one of the things we've come up is EW Pay, which is the country's first-ever Android mobile app, and this allows you to do transactions with an NFC: contactless, near-field communications. I think it's the first in the country, and we're very, very proud of this innovation. Lastly is EasyBiz, which is our revamped online banking business app, and it's really to support not just cash management, the usual banking activities, but also to look at expanding that to supply chain. Lots of things are being done in terms of the digital agenda and more to come. But at this point, please allow me to showcase and talk to you about EasyWay. EasyWay is essentially our new and updated online mobile banking app, an upgraded version of the previous app, but it's much, much more stepped up: better UI, better safety measures, biometrics and so on. More functionalities will be rolled out subsequently and consecutively throughout the months ahead as well as the years ahead. We've lined up wealth management capabilities, credit cards, personal loans, QR transactions and the like. So lots in the road map, very excited about this journey. Let me pivot now to talk to you about provisions. Our provisions for this period amounted to PHP 4.5 billion. This is equivalent to a credit cost of around 2.9%, which was brought about by a predominantly consumer portfolio, which I mentioned earlier, is around 82% of our total book and that has grown rapidly for the last 1.5 years. Expected credit losses, if I may just step back, normally prescribe higher provisioning early in the life of the loan. But typically, this declines as customer's payment behavior is being established as you know and get to know the client's behavior better. As the proportion of this portfolio becomes larger than the new loans that are coming in, credit costs normally tend to normalize over time. And so what we wanted to make sure is that we're growing this really consciously but also very, very prudently. We remain consciously prudent by setting aside sufficient provisions while maintaining our net interest margin net of credit costs that are above our peers. And we're very glad that we're able to showcase that we're able to grow in a sustainable manner. As such, we are able to continue to sustain our net income growth towards new high this year, while our return on equity is trending back to above industry averages as we execute on our barbell strategy. East West Bank, if I may just reiterate, maintains sufficient capital buffers to pursue targeted growth in businesses that would optimize our returns and capital accretion while maintaining dividend payouts. To sustain our momentum, allow me to update you on our focus areas and the initiatives that we've done so far. If I may reiterate, our aim is to be among the top consumer banks in the country, serving the mass, mass affluent, affluent, the small and the middle market businesses. And we will do this by being more digital-centric, delivering best-in-class digital channels and journeys that would drive customer acquisitions. And we will cross-sell and we will do so by pivoting towards digital. We're implementing this year our automated credit decisioning engine to expedite loan approvals for our target segments, while ensuring an optimized loan portfolio with particular focus on consumer loans where we have competitive advantages and those are, as we mentioned before, auto, cards, personal and salary. We will continue to expand our product and service offerings and this will be very, very targeted to our segments while embedding ourselves in the ecosystems of our partners and our clients. We will be exploring new adjacencies that will allow us to diversify and strengthen even further our portfolio. Some of these would be including things like secondhand car financing as an expansion to our brand-new car capability, title loans, home equity loans as an expansion from our mortgages as well as earned wages access and salary loans on the back of our payroll capabilities. So many of these things are already underway, and we're hoping to be able to give you an update on these going forward. On the other side, we will target the affluent businesses and the intersections like the business owners, the executives and the families, typically these are family-owned businesses. And this is really to expand the reach, the partnership, but also to expand our funding base. We've intensified our efforts on key cities. We've expanded, as I mentioned earlier, outside of Metro Manila. We are looking to craft location-specific value propositions that we call hyperlocal. We believe that the future is about hyperlocalizing ourselves and making ourselves really resonant to the communities that we serve. We've enhanced our cash management services, our supply chain solutions and our highly competitive ForEx rate capabilities. But we want to make sure that these are now catered to industry-specific needs. So a lot of customer value propositions and segmentations are to be expected in the coming years. For the affluent segment, as I mentioned earlier, we'll ensure nationwide coverage with diverse wealth management products. We expect to end the year with the most Priority banking centers. We're targeting to get to 14 Priority Centers up from the 11 that we have right now, which would put us as the most widely covered priority banking capability among the universal banks in the country. Lastly, we've reassessed the role of our store channels and its locations after more than 5 years since our massive expansion during that time. We are proposing to elevate the role of the store channels from transactional to more sales- and advisory-centered activities. We will complement this with our tech investments and improving digital platforms. We will also focus more on key cities, hyperlocalize them and consolidate where we see saturation opportunities. A bit of a -- again, please indulge me, very proud of this, but really more to share this with my colleagues who are responsible for this. Our efforts have been recognized by industry-leading bodies particularly those that are focused on the areas of our strategy such as consumer loans, governance, digital and wealth management. So thank you to my colleagues, but also to our partners as well as our clients who have made this happen. Next slide, please. So to conclude, this is what happened and what it means going forward. We remain to be committed to our goal to becoming a top consumer bank in the country. And our consumer-centric portfolio stands to benefit the most in a sustained consumption-led economy, which is where we are in the Philippines, a demographic of 26-year old median age hitting a per capita income of $3,500, just nice for the type of bank that we are in. We've improved margins by rebalancing towards higher-yielding segments and maintaining competitive funding costs, and we expect further margin expansion as monetary policy eases even further as is expected. And as you've seen, as I've mentioned earlier, our regulator here had already -- our Monetary Board has announced a 25 basis point cut yesterday. We will be doing this by investing in the right people, getting the right skill sets, people have seen these activities, this evolution in other parts of the world. We want to be able to contextualize them and make them work for the Philippines. And we will also be doing this by building digital capabilities that are particularly focused on our customers. We will slowly -- but I think less slowly, faster is probably more important now, in pivoting the bank towards digital and ecosystems and unlocking our next phase of growth. Very exciting times ahead of us. And in order to do this, we need to make sure that our capital ratios remain above regulatory thresholds for sustained growth and dividend payout and -- where it is today. We aim to sustain and focus our growth towards businesses that will optimize our earnings and capital acquisition. And so ladies and gentlemen, I go back to my first assertion, East West Bank continues and will become more so as the best bank proxy for the consumption-led story of the Philippines. Please, I turn you over for a few videos -- one more video before we turn it over to the Q&A session. Thank you very much for your time and for your indulgence.

Thank you for presenting, Jerry. My name is Angelo, and I'll be moderating for East West Q&A. So I have a few questions to start you off, Jerry. So first, do you have an expected full year loan growth this 2024? And what are you targeting for next year?

Thanks, Angelo. For 2024, we expect same pace as we're doing currently, which is around mid-teens, 15% and above, thereabouts. Similarly for 2025, loan growth of around 12% to 14% with consumer growing at almost the same pace as we're doing now. We will continue to grow our loan portfolio in a disciplined and optimized manner. And this is to ensure prudent and sustained growth, as I've been harping on for a while. And this will result in a certain level of portfolio rebalancing sometimes where we want to ensure that our growth is aimed towards what gives us optimized returns while also trying to minimize any concentration risk, particularly with regards to any particular asset. So that's kind of how we're approaching this.

Now moving forward to provisioning, do you expect provisions to remain elevated this year and for 2025?

We will continue to be prudent. As I mentioned, we will continue to book strong growth across our consumer loan portfolio. And as I mentioned earlier, doing so, we expect to have to book appropriate level of expected credit loss. Now the loan credit models for consumer lending is imperatively designed to book higher levels of provision in the earlier vintages. So that's kind of the phenomenon that we will always expect if you're really growing your consumer book. Based on our experience, as we grow our consumer loan business, it attracts higher provisions maybe in the first 18 months and then that will taper off as the portfolio matures. I think what's important is that our NPL ratio has been trending downwards. And in fact, it compares very well with the average in the industry despite our heavy focus on the consumer portfolio, which has been -- always been our approach. So we will continue with this trajectory. And as I mentioned, it's a phenomenon that we expect.

As far as capital generation is concerned, do you think it's enough to support your growth aspirations while sustaining dividend payments in the future?

We remain comfortable with our capital levels. It's currently at around 12%. The regulatory requirements are around 8.5%, right? We believe that they should be sufficient to support our growth aspirations at this current level of pace, right, particularly with a sustained dividend policy. So I think that's kind of our -- looking at it. We are growing in a disciplined manner with focus towards rebalancing our portfolio and ensure that our growth is towards what gives us optimal returns that will ensure us both accretive capital benefits to our shareholders, but also the risk management side. So I think it's sufficient for the pace of growth that we are seeing at the moment, obviously, ceteris paribus. If things change because there's more opportunity for further accelerated growth, then it probably might need to be relooked at.

All things equal, I understand. In terms of growth, where do you see further growth coming from East West?

I think we want to grow, but we want to grow in a disciplined manner. And so the approach that we've taken has always been how do we build on the things that we already have, right, while taking the best of what we've seen out there, particularly in terms of technology capabilities and so on. So that's kind of how we're approaching this. And so that's kind of how we've structured and strategized with regards to the people that we've been bringing in, the capabilities that we're building from the ground up. In terms of specifically answering your question, we're looking at adjacency. So adjacent businesses. We plan to increase and magnify loans where we have, what we call, economies of scope, right? Things that we already have that can actually support it. Existing infrastructure that can already support maybe new lines, for example, secondhand car auto loans are probably very, very similar to a brand new financing, particularly in the back end, right, particularly with regards to the credit monitoring, collections and so on and so forth. So the whole back end enterprise and the whole capabilities we're automating, we're making more productive, but then opening it up for a wider scale and that gives us economies of scope. We're also looking at embedded banking. I think that's the next phase to banking in the Philippines, and that's why we've invested quite a fair bit on loan origination system, credit decisioning engine and API capabilities in order to embed ourselves with other people's platform. As and when more people transact online, I think and I believe that credit provision will have to go that way as well. And so that's something that we're really building capabilities for. Lastly, ecosystems, we believe that it's all going to be about how ecosystem will be generated. I think there's a lot more ecosystems that are untapped in the country today. And that kind of links back to our hyperlocal strategy: how do we then expand into other ecosystems, bringing the anchors, our partners as well as their suppliers and their downstream customers together. So that's kind of how we're approaching these. So those are the two or three things that we're looking out at, at the moment.

So I have a concern. Your branch network has not increased in the last several years. So do you intend to expand this channel to further growth moving forward?

That's actually a really good question. We've been reviewing the channel and servicing preferences of clients. I don't know, Angelo, when was the last time you were in a bank branch, right? I think that's still probably going to happen here in the Philippines. But I think more and more, what we've noticed was that there's a change in consumer behavior particularly after the pandemic. And so with that, we're reviewing our branch network strategy and whether this can be streamlined or clustered more efficiently. We are, as mentioned earlier, increasing our digital capabilities. We want to migrate more transactions towards being digital-first. However, we believe that the significant physical infrastructure is still important and that will be very important as we drive more sales, utilization channels for validation, confirmations, but maybe also in terms of client engagement in terms of advisory. And so we're looking at different models. So we're looking at flagship stores. We're looking at [indiscernible] and we're looking at maybe even how we can augment the capabilities that we have from a physical and a digital perspective. So I guess, reimagining is the word . So there's a few things that are going through with regards to the plans. But I think it will be very, very much in line with the strategies that I've mentioned earlier.

So we have a question here from the chat. This is quite interesting. What does the market not know about East West?

Market always think of us as a small bank. We're probably like #10, #11 in terms of asset size, right? And so in an industry, particularly where size matters, that's always been the thing about East West Bank. But once you strip off and you want to focus on the consumer story, a very different picture emerges. East West Bank in terms of just the consumer portfolio relative to the other universal banks, we're probably like fifth, right, in terms of the market. Now if you've really down -- stepped down and looked at certain asset classes like personal loans, salary loans, auto loans, credit cards and so on, a very different picture, again, emerges. For example, in salary and personal loans, we're probably #3. So we really, really punch way above our weight class once you've really started strip them down. The other thing is that we're really investing on the digital side. Being small also has its advantages, it can allow you to be a bit more nimble, a bit more agile and so on. So we brought in a lot of bankers who have gone to the tech side and come back and so on. So I think that -- personally, I've done the same thing. So that kind of is really important as we kind of mix this. I think the Philippine journey would probably go through the traditional banks having to step up to get digital capabilities, right? And then really providing that capabilities towards a wider, but more focused segments. One thing I also want to highlight is, I think, very few banks have real good risk credit -- risk appetite, particularly in the consumer side, right? And I think this is something that we've invested in. We've also invested in the back-end capabilities. So collections, capabilities, and if I may say, even the repossession capability, right? So it's back on the reality of a consumer financing, consumer banking business, right? If you go in and expect that everything will be digitalized end-to-end, including production, I think you're in for a rude awakening, right? I think what's really important is that we need to be able to bring together digital capabilities that allow you to scale up, but also the on-the-ground capabilities and the experience and the insights that we've built over the years and then marry them together. I think that's kind of where I think -- if people want to know more about what we're doing, particularly if you start looking at the macroeconomic prospects of the country, I think that is where, I think, it gets really, really exciting.

That is very comprehensive. More on the technical side, I suppose. Do you have -- does East West have a share buyback option plan to help support the true market value of the company as well as maintain the required free public -- the required public float?

I think there is a regulatory impediment, if I am not mistaken. I think the current regulations in the country allows for buyback, but I think for banks we're only able to hold them as treasury shares within like 6 months, right, and so it does not really allow us to do this in a really efficient way, right? And so what we really need to go is to, one, engage more and more institutional investors to realize the -- unlock potential of our stock at the price-to-book of where it is today. It's a really [ deep value ]. If you look at it from a PE perspective and if you look at it in terms of potential growth, it's quite significant, right? So I think -- hence, the reason why we're here and thank you guys for giving us this opportunity. But yes, we did explore, but my understanding is there are regulatory impediments in order to do that in an effective way.

That sounds like a buy to me, Jerry. So moving forward, what steps are being taken to improve operational efficiency, particularly in areas like technology and branch optimization. I think this is right up your alley.

Yes. I think the first thing is digital-first, right? I think a lot of these things would be around designing product services that will be delivered in a digital manner, right? I think everyone expects a digital experience even if they are expecting a physical experience as well, right? So I think that's already a given. But I think not all digital experience are built the same way, right? And again, that's very, very important is to make that more intuitive, to make that easy and that's why we went with this marketing campaign of sit back and relax, right? So EasyWay is how we're looking at this, is to make sure that, that whole exercise become easier. Quite interesting about banking is that bankers tend to make too many jargons, right? It's deposits or view accounts, they would have a terminology. Sending money would be fund transfer or remittances and so on, right? So we were just in discussion earlier why can't it be said to be -- labeled as see my money or send money, right? I mean, making it really intuitive and making it really accessible is probably very important. We also believe that, I think, there will need to be a physical-digital confluence, right? And I think that's very important because I think people would still be doing banking as a matter of trust, as a matter of relationship. And so we want to make sure that we are really good at this physical and digital journey and then mapping that together seamlessly, making sure that we leverage on our store network and getting the most out of it, but also making sure that we're also delivering that together with our digital capabilities. We were also reviewing quite a fair bit on robotic process automation, how we can make more of our internal processes straight through and that's what is starting to happen. We've reviewed our data lakehouse, we've built our data schema. We've put it all together and that gives us more analytical capabilities and so on. We're trying out a few AI models, but not to be directly related to the client, but more as an augmentation tool to make our staff more effective. So large language models, we've been training a few of them in order to help us make our capabilities more streamlined and the customer journey and experience much more effortless. So lots of things going on. In fact, we have a group and I think I mentioned earlier about our strategic team, the [ EPMO that's ] been there to help us to implement this type of initiatives across the bank.

One question here about your hyperlocalization strategy. So how is East West going to carry this out? And how does this affect operations in individual branches as well as what will it look like on the client experience?

Yes. I think that's a good -- I think it will have to be nuanced, right? And I think that's very, very important. I think that's the world that we want to build. We want to make sure that we are having standard activities and processes, which can be customized. And I know at some point they are counter to each other, right? But what you want to do is to have standardized, generic capabilities at the back, but with the ability to be nuanced in terms of how the pitch and provide the capabilities to the clients. And I think that will emanate with my colleagues in the ground, particularly in the cities that we're localizing and hyperlocalizing to have a more say on the table for them to be able to become more effective advocates with regards to the needs and the pain points of the clients that we serve, right? And so that's something that would be quite important. In a very example -- a very specific example would be marketing and promotions, right? There are obviously lots of marketing and promotions right now, which helps us very well in Metro Manila. But once you're outside, let's say, in Pampanga, in Baguio or maybe Bulacan or Calamba, the set of restaurants, F&B outlet changes, right, and maybe we want to think a bit more in terms of what it meant for the clientele in that area. So I think many of this will probably be around how we design things, but also in terms of how do we engage our own staff locally, but also our clients to give us that effective feedback.

I believe we have time for one last question on your credit cards. So how is East West managing its credit card promotions in comparison to other major banks in the country? And what strategies are being implemented to grow its market share?

Yes. I think, I kind of said it earlier, right. A lot of the things that we're doing right now with regards to our credit card promotions have been our tie-ups. But not just the tie-ups, but really around choosing the tie-ups that are more hyperlocalized, right? More localized, more targeted, smaller groups of clientele and the things that resonate with them. So I think that's one thing that we're really quite proud of. The marketing team, Mia Tamayo and her team have been very hard at work on making this happen. So we're excited. We have a team in Cebu looking after VisMin with Jovi. That's also done very well. So I think that's something that we want to push forward. The other thing is I did a -- I spoke earlier about this EW Pay, which is the country's first NFC contactless card, which allows you to basically -- like an Apple Pay, which has not been opened yet in the country. But using an Android phone with an EW Pay app, you can just tap and then you can make your payment. So those innovations are coming in and so those are the things that we -- aside from the fact that we are also making sure that we're delivering segment-specific cards, it's about segment-resonating marketing promotions, localized partnerships, but also the technology innovation. In banking, it's not a really big thing. There's no such thing as a magic wand. It's around creating small, accretive, functional product and service capabilities that, together, amounts to a particular impact to a particular segment of clients. So that's how we're doing this, every little bit counts.

I appreciate that, Jerry. And on behalf of chat, thank you very much for indulging us with East West. I'm passing it back to Lisa. Thank you.

Thanks, Angelo. Thanks, Lisa.

Thank you very much, Jerry, the CEO of East West Bank, for your clear and comprehensive presentation and for joining us for this event.