EastWest H1 profit drops 60% to P1.52 billion

MANILA, Philippines — The net income of Gotianun-led East West Banking Corp. fell by 60 percent to P1.52 billion in the first half   from P3.8 billion in the same period last year on the back of lower operating earnings and higher provisioning for potential loan losses.

The listed bank’s net interest income slipped by 3.9 percent to P11.05 billion from P11.49 billion, while total operating income declined by 15.9 percent to P12.61 billion from P14.99 billion.

EastWest booked losses on trading and securities amounting to P420.68 million due to the global rise in interest rates as monetary authorities ramped up efforts to contain inflation, sale of asset at P100.64 million, as well as asset foreclosure and dacion transactions at P45.68 million.

Likewise, earnings from service charges, fees, and commissions plunged by 39.4 percent to P1.33 billion in the first semester from P2.19 billion in the same period last year due to lower loan levels and consequent lower loan-related fees.

The publicly held bank reported a 5.3-percent increase in total operating expenses to P10.35 billion from P9.83 billion, as provision for impairment and credit losses jumped by 47.5 percent to P2.11 billion from P1.43 billion.

For the second quarter alone, the earnings of EastWest fell by 42.9 percent to P1.01 billion from P1.77 billion in the same quarter last year. However, the amount was almost double the P507.6-million net income in the first quarter.

During the quarter, total operating income slipped by five percent to P6.81 billion from P7.17 billion, while operating expenses went up by 8.3 percent to P5.29 billion from P4.88 billion.

The bank’s provision for potential loan losses during the quarter surged by 52.7 percent to P1.08 billion from P705.62 million.

Given current trends and second quarter results, EastWest president Jackie Fernandez said the bank now expects total revenues, excluding trading, at P26 billion from the P25 billion guidance   in the first quarter.

“However, with the uncertain trading income, we still expect net income at around P4 billion. By the fourth quarter, EastWest quarterly income, ex-trading, should have recovered pre-pandemic levels and trend towards P1.25 billion or P5 billion on an annualized basis,” Fernandez said.

The bank’s loan book increased slightly by one percent to P227.6 billion, driven by the five percent rise in business loans to P59.6 billion. Likewise, consumer loans accounting for 74 percent of the total loan portfolio slipped by one percent to P168 billion due primarily to the decline in auto loans.

Its non-performing loans (NPL) to total gross loans improved to 9.8 percent as of end-June from last year’s 10.4 percent due to the impact of the pandemic to borrowers in meeting their obligations and the overall decline of the bank’s total loan portfolio.

On the other hand, EastWest said its deposit base increased by six percent to P335.7 billion, with low-cost current account and saving account (CASA) increasing by 11 percent to P254.7 billion, while time deposits declined by eight percent to P81 billion.

“This industry trend, however, could reverse as monetary policy moves toward tightening. With the resulting higher interest rates, the opportunity cost to depositors of keeping their money in CASA versus placing it in time deposits increases,” the bank said.

Total assets grew by four percent to P415 billion, while capital adequacy ratio (CAR) and common equity tier 1 (CET1) ratio improved to 14.8 percent and 13.6 percent, respectively.