EAST WEST Banking Corp. (EastWest Bank) saw its net income rise by 4.8% to P6.5 billion last year from P6.2 billion in 2019 on the back of higher interest income and strong trading gains.
The Gotianun-led lender said in a disclosure to the local bourse on Wednesday that its net earnings resulted in a return on equity (RoE) of 12.3% against 2019’s 14%.
EastWest Bank President and CEO Antonio C. Moncupa, Jr. attributed the bank’s financial performance last year to the economy’s severe 9.5% contraction, which hampered the lender’s growth and dampened its operations.
“For EastWest Bank, (the 2020 recession) meant lower growth as the uncertainties put resiliency at the top of its agenda. It also resulted in lower volume of new business, less transactions across all businesses, and higher provisions for loan losses,” Mr. Moncupa was quoted as saying.
“On the other hand, lower rates and the consequent lower funding costs resulted in higher net interest margins and higher trading gains. These offsetting tendencies drove the flattish operating results of the bank,” he said.
The bank’s net interest income climbed by 23% to P26.5 billion on the back of lower funding costs. It recorded a net interest margin of 8.1%, up from 6.9% a year ago.
It posted P33.4 billion in net revenues in 2020, up 16% year on year.
EastWest Bank also set aside P9.8 billion in provisions for expected loan losses, or 2.4 times higher than the P4 billion seen in 2019.
Meanwhile, non-interest income declined by 5% to P6.9 billion amid lower fees and other charges collected after the government imposed a moratorium on loan payments and as business activities were muted amid the pandemic.
The bank noted that it booked a P2.7-billion “modification loss” or the estimated value of debt relief granted to borrowers during the crisis.
This was partially offset by the P4.2-billion increase in trading gains amid low interest rates and a good trading environment.
Meanwhile, the bank saw its operating expenses minus loan loss provisions dip by 1% from a year ago to P16.2 billion, reducing its cost-to-income ratio to 49% from 57% the year before.
Its total loans and receivables went down by 9% year on year to P243.7 billion in 2020 on contractual maturities and weak demand from businesses and households during the crisis.
On the funding side, deposits rose by 8% to P329.1 billion, with its low-cost current account, savings account (CASA) deposits posting a 23% jump to P228.8 billion. This brought last year’s CASA ratio to 70%, up from 61% in 2019.
EastWest Bank’s capital adequacy ratio went up to 13.8% in 2020 from 12.9% the year prior, while its common equity Tier 1 ratio also rose to 12.6% from 10.4%. It said it maintained strong capital buffers on the back of higher revenues and the slower growth in its risk-weighted assets.
Its total assets inched up by 0.47% to P408.2 billion from P406.3 billion in 2019.
“While the bank has been among the top three most profitable universal banks in the last four years, the prospect of a ‘five-peat’ is uncertain for 2021. The shifting contours of the coronavirus pandemic make it difficult to pin down a 2021 income guidance. Fortunately, the bank with its higher capital buffers and the loan loss provisions in 2020 is in a good position to face the remaining pandemic challenges and the rebuilding that will follow the vaccines,” Mr. Moncupa said.
EastWest Bank’s shares went up by 0.53% or five centavos to close at P9.56 apiece on Wednesday. — Beatrice M. Laforga