EastWest Bank income climbs 75% in 1st quarter

EAST WEST Banking Corp. (EastWest Bank) booked a 75% increase in net profit in the first three months of the year, supported by better margins from its core businesses as well as higher trading income.

The bank’s net income in the January to March period hit P2.3 billion, surging by 75% from the comparable year-ago period.

Its return on equity stood at 18% during the quarter.

“The higher income in the first three months of 2020 was driven by better margins from its core lending and deposit-taking business and higher trading gains,” EastWest Bank said in a filing with the local bourse.

EastWest allotted P2.4 billion for loan provisions, 2.8 times higher than what it set aside last year, as it factored in the impact of the coronavirus disease 2019 (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,” it said.

Meanwhile, net revenues expanded by 45% to P9.6 billion from the P6.6 billion posted in the first quarter of 2019.

During the first three months of the year, the bank’s net interest income, which made up 69% of its revenues, climbed 42%.

Net interest margin was at 8.1%, 173 basis points higher from a year ago, boosted by market liquidity and normalizing deposit rates. EastWest Bank said deposit costs were substantially higher and pushed its margins lower in the early part of 2019.

Non-interest income also jumped by 52% backed by securities trading gains.

Meanwhile, EastWest Bank’s operating expenses, excluding provisions for losses, rose by 14% to P4.6 billion due to higher compensation costs.

Its cost-to-income ratio settled at 48%, improving from the 60% seen a year ago.

Total loans increased by 6% to P261.4 billion. Meanwhile, total assets grew 3% to P384.1 billion.

The bank’s deposits rose 3% to P294.3 billion as it had just replaced its time deposits with low-cost funds, which partly accounted for the improvement in margins.

“EastWest Bank’s asset and loan growth for the quarter were among its lowest in years, partly due to less aggressive lending in consideration of the virus,” the bank said.

“We were looking forward to another record year, at least P8.0 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,” EastWest Bank President and Chief Executive Officer Antonio C. Moncupa, Jr. was quoted as saying.

“This pandemic is unprecedented and is still playing out. With no historical guide to anchor on, it is difficult to estimate bad debts. A lot now depends on government policy interventions,” Mr. Moncupa added.

EastWest Bank’s shares closed at P7.01 apiece on Monday, down by 29 centavos or by 3.97% from its previous finish. — Luz Wendy T. Noble