EastWest Bank nets 75% more on better margins

MANILA, Philippines — Earnings of Gotianun-led East West Banking Corp. surged by 75 percent to P2.3 billion in the first quarter from P1.3 billion in the same period last year despite higher provisioning for bad loans.

EastWest president and chief executive officer Antonio Moncupa Jr. said the bank is preparing to book lower net income this year due to the impact of the coronavirus disease 2019 or COVID-19 outbreak.

Moncupa said the bank was originally looking at another record year with a net income of P8 billion this year, or about 28 percent higher than last year’s P6.24 billion.

“We are looking forward to another record year, at least P8 billion in income for 2020 – until COVID-19 struck. Now, we have to be ready that profits could be lower this year. We have to book ‘anticipative provisions’ for loan losses and may need to continue doing so in the coming months as the economic damage to households and businesses from the virus-induced disruption unfolds,” Moncupa said.

In the first three months, the robust financial performance was driven by better margins from its core lending and deposit-taking business and higher trading gains, translating to a return on equity (ROE) of 18 percent from a year ago level of 12 percent.

However, the bank decided to jack up its provisioning for soured loans to P2.4 billion from January to March, 2.8 times the amount it earmarked for bad debts in the same period last year.

“EastWest joins the growing number of big banks increasing loan loss provisions because of COVID-19. The lockdown, the only viable response to stem the spread of the virus until a vaccine is found, has shuttered the economy and is expected to make it difficult for some businesses and consumers to service loans,” the bank said in a statement.

The bank’s revenues surged by 45 percent to P9.6 billion from P6.6 billion as net interest income increased by 42 percent to P1.9 billion and accounted for 69 percent of the total revenues.

The bank said net interest margin improved by 173 basis points to 8.1 percent from 6.4 percent as market liquidity, and deposit rates normalized.

Likewise, securities trading gains pushed the bank’s non-interest income higher by 52 percent to P1 billion.

Excluding provision for losses, EastWest recorded a 14 percent increase in operating expenses to P4.6 billion in the first quarter from P4 billion in the same quarter last year.

Its total assets inched up by three percent to P384.1 billion as the bank’s loan book rose by six percent to P261.4 billion.

“Asset and loan growth for the quarter were among its lowest in years, partly due to less aggressive lending in consideration of the virus,” it said.