EAST WEST Banking Corp. (EastWest Bank) booked a higher net income in the third quarter, mainly driven by a rise in loans and fixed-income securities.

The bank’s net profit rose by 16.6% to P1.51 billion in the July to September period from P1.295 billion a year earlier, based on its quarterly financial report released on Tuesday.

This brought the Gotianun-led bank’s net income for the first nine months to P3.03 billion, dropping by 40.4% year on year from P5.098 billion, amid lower trading revenues.

As of end-September, EastWest Bank’s return on equity and return on assets were at 6.8% and 1%, respectively. Both declined from the 11.8% and 1.7% seen a year earlier.

“Despite the global slowdown, the Philippine economy is still expected to meet its full-year growth estimates of at least 7%. The bank is watching macroeconomic developments and remains cautiously optimistic that the economic backdrop will continue to be supportive of its growth plans,” EastWest Bank said.

“For the remainder of the year, the bank is upgrading its forecast with total revenues, excluding trading, at P28.1 billion from the P25.1 billion in 2021. Net income for 2022 is expected at P4.5 billion with fourth quarter at P1.5 billion… While the income levels are expected to be flattish, unlike 2021 when quarterly income was on a decreasing trend due to the run-off in loans, in 2022, income is on the uptrend as the bank started to recover lost loan volumes and has rebuilt its fixed-income portfolios,” it said.

In the third quarter, the bank’s net interest income increased by 24.22% year on year to P6.099 billion from P4.91 on the back of strong demand for loans.

Interest income from loans and receivables rose 15% year on year to P5.67 billion in the third quarter from P4.93 billion in the same period last year.

In the nine-month period, the lender’s net interest income totaled P17.15 billion, higher by 4.6% from P16.4 billion a year ago.   

Its net interest margin as of end-September was at 7.1%, increasing from 6.5% last year.

Meanwhile, EastWest Bank’s fee income in the third quarter also rose by 96.23% to P1.26 billion from P642.11 million in the same period a year prior.

The lender also posted trading losses worth P58.93 million in the third quarter, smaller by 54.5% from the P129.47-million loss in the same period in 2021.

Its total operating income grew by 13.51% to P7.73 billion in the three months ended September from P6.81 billion a year ago.

Meanwhile, the bank’s operating expenses in the third quarter went up by 15.17% year on year to P5.77 billion from P5.01 billion last year.

Cost-to-income ratio was at 61.8%, higher than the 58.2% seen last year.

EastWest Bank’s gross loans climbed by 10% to P243.8 billion as of September on the back of higher consumer lending amid the country’s economic recovery, it said. Business loans grew by 6% to P63.9 billion and consumer loans, which accounted for 74% of the bank’s portfolio, rose 11%.

“Meanwhile, credit cards portfolio growth was driven by consumer spending that drove retail and installment billings up,” the bank said.

“In contrast, auto, mortgage and personal loans declined by P11.3 billion combined from last year, as new loan releases were still not enough to cover for maturities. Auto and personal, however, have started growing again towards the end of the second quarter, driven by demand and normalization of credit policies,” it added.

The bank’s nonperforming loan ratio improved to 8.3% from 11.3% a year ago, when the pandemic hit borrowers’ repayment ability, the bank said.

Its provisions for losses stood at P3.5 billion in the first nine months, 65% higher year on year and making up 2.1% of its gross loans.

“In 2021, the loan losses were underestimated in the third quarter and had to catch up in the fourth quarter. The bank believes that the current level of provisions is adequate as it shakes off the residual adverse impact of the pandemic,” it said.

On the funding side, deposits stood at P319 billion at end-September.

Current account, savings account or CASA deposits rose 11% to P256.6 billion, bringing its CASA ratio to 80% as of September.

“The bank started to deploy its liquidity buffers, which were at higher-than-normal levels, to fund increases in loans and fixed-income securities… While CASA ratio improved to 80% from the previous year’s 73%, moving forward, we expect deposit cost to go higher as the bank starts to source new deposits and the impact of higher interest rates start to manifest. We see BSP (Bangko Sentral ng Pilipinas) continuing their efforts to control inflation that is expected to result in tighter financial conditions,” the bank said.

“We also expect some CASA depositors to shift to better yielding time deposits as opportunity costs of holding CASA increase. The industry’s improving CASA ratio may start to stall. Loan rates are expected to increase as well, and should cover higher deposit costs for banks that have more variable rate assets,” it added.

EastWest Bank’s total assets stood at P405.21 billion at end-September, 2% higher than P399.1 billion in the same period last year.

The lender’s capital adequacy and common equity Tier 1 (CET1) ratios were at 13.9% and 13.1% as of end-September, respectively. The bank said it aims to maintain a CET1 ratio of 12-13% given its business model.

EastWest Bank shares ended trading at P6.11 apiece on Tuesday, up by 12 centavos or 2%. — Keisha B. Ta-asan