EastWest Bank Q1 profit plunges 38% to P455.7 M

MANILA, Philippines - East West Banking Corp., the banking arm of the Gotianun-led Filinvest Group, has reported a 38 percent drop in net income in the first three months of 2014 to P455.7 million due to substantial decline in trading gains during the period.

In a report, EastWest said a P756-million drop in trading income was recorded in the first quarter.

EastWest’s lower trading revenues, however, were offset by the strong gains in its core banking businesses.

Its customer loans increased 37.1 percent to P102 billion, with both corporate and consumer lending businesses posting double-digit growth of 47.8 percent and 28.4 percent, respectively. 

Total deposits stood at P122.9 billion, a growth of 41.8 percent as compared to the same period last year, with low-cost deposits (CA/SA) growing 50.5 percent on account of its expanded branch network.

The bank also maintained its industry-leading net interest margin of eight percent for the first three months of the year, driven by its significant consumer portfolio and improvement in its funding costs.  

EastWest has the highest proportion of consumer loans among universal banks, with 52 percent of its loan portfolio.

Its net interest income increased 23.7 percent to P2.3 billion, as interest income grew 14.5 percent while interest expense declined 23.9 percent, even as total deposits were 41.8 percent higher.

Non-interest income, excluding trading, went up 22.9 percent to P800.1 million.

These are largely recurring fee-income, driven by the growth in consumer loans business and transactional income from the branches. However, the bank was not spared by the industry-wide decline in trading gains as interest rates started to move higher and volatility increased in both fixed income and currency markets.

Total operational expenses, including provision for loan losses, remained flat at P2.9 billion. 

The bank reported that expenses would have increased double digits if the higher than normal expenses booked last year were taken into account. 

The bank said that it is feeling the full impact of the 178 branches opened in 2012 and 2013. 

EastWest opened another 29 new branches this year, bringing its total network to 376. The bank expects to end the year with total branches, which it now refers to as stores, of at least 400.

“As we have said in the past, our branch expansion will cost dearly, especially in 2014. The costs are upfront as we hire more people and spend on infrastructure, while revenues will be built over time. But we need to do these necessary investments to build our future revenue base and ensure we remain competitive,” EastWest president and CEO Antonio C. Moncupa Jr. said.

“We are happy and thankful to note that core revenues are growing faster than we initially expected.  This is most helpful to offset the costs of expansion and lower trading revenues.  This is not a year for trading. Interest should go a bit higher and volatility will be a little more pronounced as the world economy recovers and the Philippines sustains its growth momentum,” he said.

“Fortunately, we have good core banking businesses. Overall, we still think business will be good in the coming years,” he added.

EastWest is a subsidiary of the Filinvest Development Corp. (FDC), one of the largest and well established business conglomerates in the Philippines.  FDC, established in 1955, is identified with the Gotianun family and aside from banking, its business interests include real estate, sugar, hospitality and tourism, and power generation.