EastWest Banking Corp., the financial unit of Filinvest Development Corp., said Thursday net income jumped 36 percent in the first quarter to P1.3 billion from a year ago, on the back of higher loans, deposits, fees and trading gains.
EastWest said in a statement the remarkable performance in the period resulted in a return on equity of 12 percent, sustaining its strong profitability the past few years.
Revenues rose 13.3 percent to P6.6 billion from P5.8 billion in the same period last year. This was driven by fees and commissions growing by 29 percent to P1.3 billion. Securities and foreign exchange trading gains improved to P525.1 million from a loss of P136.5 million in the same period last year.
The bank said the increase in income was mostly due to the resumption of its rural bank subsidiary’s DepEd loan program, improved trading income, and lower credit costs. Most banks reported better trading income this year.
“In the first quarter of 2019, our rural bank continued to normalize its public-school teacher financing program. We recovered from last year’s first-quarter trading loss, and continue to benefit from the seasoning of our consumer loan portfolio,” EastWest president and deputy chief executive Bobby Reyes said.
Consumer loans comprised 71 percent of total loans and had the highest proportion of consumer loans as a percentage of its total loan portfolio among universal banks in the Philippines, based on publicly-available sources. Julito G. Rada
Its net interest margin at 6.4 percent is among the highest industry due to this unique loan mix. The bank said earlier that due to tighter liquidity and higher funding costs, its margins went lower. While gross interest income increased by 19 percent to P7.0 billion, driven by the increase in earning assets, interest expense increased more than twice from last year to P2.3 billion.
Reyes said despite the lower margins, the larger spread provided a buffer against the impact of the current environment.
“For now, our bigger spreads are making up for the higher funding costs, but we know this is not sustainable. We need to improve our deposit structure, and grow the balance sheet to improve operating efficiencies” Reyes said.
Operating expenses excluding provisions for losses increased by 19 percent to P4.0 billion, mainly due to business taxes such as gross receipts and documentary stamp taxes and the continued marketing communication campaigns.
Provisions for losses went down by 22 percent from the previous year to P872.6 million, while ensuring the bank’s loan portfolio is properly provisioned for.
Total assets grew 18 percent year-on-year to P372.8 billion with total loans driving the growth at 12 percent to end at P246.2 billion. Consumer loans went up by 10 percent while middle-market business loans also contributed a 19-percent growth.
This was funded mainly by deposits, growing 12 percent to P286.2 billion. Capital ratios remained healthy and within regulatory standards, with capital adequacy ratio and CET1 ratios at 12.6 percent and 9.9 percent, respectively.
“For the rest of 2019, we expect market liquidity situation to improve and interest rates to go lower as the year progresses. This is expected to be felt in the second half of the year,” Reyes said.