East West Bancorp Inc. is heavily involved in California’s deteriorating commercial real-estate and mortgages market, but its strong capital position could help it weather the downturn better than its rivals.

The Pasadena-based bank, which caters to Chinese-Americans, has been hurt by the recession as it has a significant amount of commercial real estate and mortgages on its books, but the bank has strong liquidity and a solid reserve-to-loan ratio. Additionally, East West’s Tier 1 capital ratio, which is the core measure of a bank’s financial strength from regulators’ perspective, is 13.9 percent, well above the 6 percent considered by regulators to be sufficiently capitalized.

East West’s problem areas have been in land development, construction and real-estate loans, said analyst Lana Chan at BMO Capital Markets. The next cause for concern is that “deterioration is spreading to commercial real estate and mortgage,” she added.

–

Read the full

Wall Street Journal

story (subscription required).