EastWest net profit falls 18% in H1 on weak loan activity

East West Banking Corp. (EastWest Bank) booked lower net earnings in the first half of the year due to decline in both loan revenue and trading gains.

Net profit fell 18% from a year earlier to P3.8 billion in the six months to June, the bank said in a statement.

“The lower income was mainly due to lower loan revenue and trading gains,” it said.

Net interest income declined 14% to P11.5 billion after it made fewer loans and realized weaker yields on both loans and fixed-income securities, the bank said.

“This was partly cushioned by the decline in funding costs as the BSP maintained its accommodative monetary policy,” EastWest said.

The return on equity was 13.3% at end of June, against the year-earlier 17.4%.

The net interest margin was at 7.3%, down from 8.3% a year earlier. “(The bank’s) consumer-heavy loan portfolio allowed the Bank to maintain its industry-leading margins,” it said.

Trading gains declined 49% year-on-year to P1.6 billion.

Fee income rose 22% to P2.2 billion as the economy and banking transaction volume started to improve.

Revenue in the first half declined 19% to P15 billion.

Provisioning for loan losses fell 74% to P1.4 billion, after it had recognized a significant proportion of its loan losses last year.

“Based on current economic trends and the expected acceleration of vaccination, we believe the worst is over and economic conditions should start to improve. Provisions for loan losses this year should be lower from the abnormally high levels last year. Nonetheless, we continue to monitor and manage our credit risk taking” EastWest Chief Lending Officer Jacqueline S. Fernandez said.

Loan volume fell 12% to P225.8 billion, dragged down by weak demand and as the bank adopted a “prudent risk-taking” strategy.

Deposits rose 6% to P317.8 billion, driven by the 21% growth in money held in current accounts and savings accounts (CASA) which offset a 20% decline in time deposits. The CASA ratio improved to 72% at the end of June from 63% a year earlier.

The capital adequacy ratio stood at 14.7% at the end of June, higher than the year-earlier 13%, while Tier-1 common equity came in at 13.6%, up from 11.9% previously. Both are well above minimum regulatory requirements.

“We expect to sustain decent levels of profitability this year. We believe the economy is at the inflection point of recovery. We expect to come out from this pandemic with higher capital buffers and in a good position to recover lost ground and resume our growth programs,” EastWest President and Chief Executive Officer Antonio C. Moncupa, Jr. said.

Shares of the bank, controlled by the Gotianun family, closed at P9.33 Friday, down 0.74%. – Beatrice M. Laforga