MANILA, Philippines — Gotianun-led East West Banking Corp. sees a better year this year as its quarter-on-quarter financial performance remained robust amid headwinds brought about by elevated inflation and rising interest rates.
In a virtual press conference after the bank’s annual stockholders’ meeting, EastWest CEO Jerry Ngo said the bank’s financial performance in the third and fourth quarters of last year continued in the first quarter of this year despite the shorter number of days in February.
“We’re very glad to see that it’s been consistent. We obviously are hoping that this will continue and even increase in the later parts of the year,” Ngo said.
Ngo said that EastWest has regained its momentum and is almost back to its pre-pandemic level, with earnings rising by more two percent to P4.6 billion last year from P4.5 billion in 2021.
Excluding the one-off items in 2021, Ngo said the bank’s net income would have jumped by 42 percent. “So I think normalized 2023 should be much better than 2022,” he said.
EastWest’s loan book expanded by 20 percent to P258.7 billion last year, driven by the 22-percent jump in consumer loans, as well as the 13-percent increase in business loans.
The bank’s non-performing loan ratio improved to 7.1 percent in end-2022 from 11.1 percent in end 2021.
Likewise, its provision for potential loan losses rose by 19 percent to P5 billion from the impact of higher loan volumes and residual effects of the COVID-19 pandemic on its consumer portfolio that account for 73 percent of its loan book.
“As you know, the overall market has been affected by rising interest rates. And so that’s something that we’re very focused on in terms of ensuring that we continue to have sufficient liquidity to support this loan growth,” Ngo said.
The Bangko Sentral ng Pilipinas (BSP) has so far raised key policy rates by 425 basis points since it started its interest rate liftoff in May last year to tame inflation and stabilize the peso.
This brought the overnight reverse repurchase rate to a 16-year high of 6.25 percent from an all-time low of two percent during the height of the global health crisis.
“We’re very, very optimistic for this year, although it is now with its challenges,” he said.
According to Ngo, challenges include the impact of the interest rate environment affecting all banks, as well as the higher spending for information technology.
The veteran banker also cited the demographic sweet spot that could serve as an edge for the Philippines.
The strong performance allowed the bank to declare cash dividends of P925 million, with a dividend payout ratio of 20 percent equivalent to P0.41 per share, to be paid out to stockholders on May 31.
In light of the direction it set for its growth this year, the bank invested heavily on IT systems to help improve its digital services, prime it for faster digital innovations, and improve its operating costs through automation.