Understanding risk while remaining flexible in banking is crucial to helping niche industries find success. In his 25-year career in finance, Andrew Stein, senior managing director and head of commercial banking and specialty finance at East West Bank, has developed an “innate sense” of what those risks might entail. Since starting at East West Bank nearly six years ago, he has successfully launched the structured finance team and has grown it to include Specialty Finance and Project Finance. Stein also helps manage the Capital Markets and East West Equipment Finance specialty verticals, as well as the core commercial and industrial business in the Eastern Region.
In order to maximize the number of businesses they can support, Stein makes it a point not to limit his team to particular industries. “As a rule, I try to look at every deal on its own merits, with an open mind, and try not to paint industries with a broad brush,” he says.
Stein sat down with us to talk more about what it takes to be an effective team leader, how he and his team stay nimble and how structured finance can help companies grow.
Over all the business verticals that we’re in, the common theme is that we lend to middle-market companies, and we finance their acquisitions, working capital needs, inventory and their equipment needs. All these things are used to support their business and their future growth. In that way, that’s how we help all our clients grow.
We try to do deals with high perceived risk but low actual risk. For example, we finance some pretty esoteric asset classes, like fine art—Van Goghs, Monets. These are things that you would think are really risky due to the esoteric nature of the asset class, but we mitigate the risk by doing in-depth due diligence consisting of detailed collateral review and review of the books and records. We also have tight structures with conservative leverage, cash controls, third party custodians and backup servicers.
One company that we recently lent to is a vitamin distributor. We started with a small loan to help them grow their business, and we advised them that they should diversify their clients because they had a very concentrated client base. Now, over the years, they have over 100 clients. We also put in place tight covenants because they didn’t have a lot of equity, so we held them in check. What they tell us today is that the covenants we put in place really helped them and made them have discipline—that’s a reason why they’ve been able to grow so successfully. Now, they’re being pursued by all the big banks, but they’re staying with us because of what we’ve done for them.
I think what people and companies and clients like about us is that we take an open-minded approach. For a lot of banks, everything is very boxed in, in terms of what they do and don’t do. They don’t take an open-minded approach.
We’re also more open to smaller deals. A lot of banks will only take big deals because they have to make a certain amount of money—they have big teams to feed. As a result, they work only on big things. We’re more of a middle-market bank, so we’re willing to look at smaller deals, as long as the companies that we bank are adequately capitalized and sophisticated enough.
We’re fairly nimble, in terms of how we can respond to the market. It’s not such a bureaucracy here, where there’s multiple layers you have to go through. The response that we give to the market has been pretty consistent, so companies are comfortable that if I say something, they can put real stock in it because I have the backing of my company.
It all starts with the people. We look for people that are entrepreneurial, that have strong credit skills, that are self-motivated, and also they have a background in a niche business where East West Bank can be competitive in and earn a strong risk-adjusted return.
In terms of managing the team and leading the team, I try to empower people to make decisions that directly impact the success of the business. People feel empowered when they have some control over their destiny—that really is a motivating factor. If they don’t feel empowered, they become frustrated. I try to be fair but tough. I don’t ask anybody to do anything that I wouldn’t do.
I try to make the work environment a fun place to be, since we spend most of our waking hours here. I walk around the floor, talk to people, ask them what they’re doing. I encourage communication—also a key thing. I keep an open door so people feel like they can come in and talk to me.
I try to make it an enjoyable place, so people don’t dread coming to work. We have some lunches, we go out for a drink once in a while—we hang out. We have a place called Joe’s next door that we go to a lot—that’s a good tavern kind of place. We’ve been talking about going, now that the weather is nicer, to this burger place that is famous here in New York. I should probably do more of it—I’m so busy during the day trying to get through things, so I don’t always have time to step back and do those things.
I enjoy seeing live music, bands, listening to music. That relaxes me. Especially working in New York City, you need to tune out some of the noise and stress. Music is a good way to do that. I’m a child of the ‘70s and ‘80s, so I like classic rock, but I also like jazz. My wife is a Jersey girl, so she got me into Bruce Springsteen. My oldest son got me into jazz—he’s a musician. He played a lot of jazz—he was in jazz band in high school.
Also, I enjoy going to all the great restaurants in New York City. I like good, wholesome foods. It doesn’t have to be really fancy. There’s a great Italian restaurant downtown called Piccolo Angolo that my wife and I love. That’s my go-to favorite. They make this lobster cannelloni that’s really delicious, and veal marsala and these big, huge meatballs.
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