EAST WEST Banking Corp. (EastWest Bank) booked a lower net income in 2018 as its net revenues declined slightly due to margin compression.
In a disclosure to the local bourse on Wednesday, the Gotianun-led lender said it booked a P4.5-billion net profit last year, 11.8% lower than the P5.1 billion tallied in 2017.
EastWest Bank’s full-year income translated to a return on equity of 11% and return on assets of 1.4%.
Net revenues stood at P25.5 billion, down 0.8% from the P25.7 billion logged the prior year on lower margins as deposit interest costs grew “significantly higher” and as its fixed income trading profits declined.
The bank also attributed its lower net revenues to the suspension of EastWest Rural Bank’s lending program to teachers in the first half of 2018.
In early 2018, the Department of Education suspended its automatic payroll deduction system for loans and insurance payments until June as it worked on new guidelines, making EastWest Rural Bank as well as other lenders unable to issue loans for public school teachers.
EastWest Bank’s net interest income grew 4.3% to P19.3 billion in 2018 from P18.5 billion the previous year as growth in consumer loans offset lower interest margins.
The lender said its consumer business accounted for 70% of its total loan portfolio last year as auto, credit card and personal loans grew by 16%.
Net interest margin was at 7.4%, with EastWest Bank claiming it to be the highest among universal banks.
Fees and commissions also went down 9% to P4.9 billion, dragged by the suspension of the teachers’ lending program of its rural banking arm as well as regulatory changes.
Trading income slipped 34% year-on-year to P502.7 million.
The lender set aside P3.8 billion in provisions for loan losses, down 16% from 2017’s level, with the bank saying its consumer loan portfolio “has largely matured.”
Excluding the provisions, operating expenses increased by 10% to P15.4 billion, almost half of which were due to higher spending for training, advertising and higher documentary stamp taxes.
Overall, EastWest Bank’s total assets grew by 16% to P367.4 billion at end-2018.
Jesus Roberto S. Reyes, EastWest Bank president and deputy chief executive officer, said the bank managed to register a good level of profitability in 2018 despite the “more challenging” external developments.
“We are positive that 2019 will be a better year for EastWest Bank as interest rates stabilize and the country’s growth story continues,” Mr. Reyes was quoted as saying in the statement.
EastWest Bank shares closed unchanged at P12.22 each on Wednesday. — KANV