Solidarity in the time of COVID-19 -- MS Supplement

EastWest Bank’s income jumped 75% to P2.3b in Q1

EastWest Banking Corp., one of the largest universal banks in the Philippines and a unit of Filinvest Development Corp., said net income in the first quarter jumped 75 percent to P2.3 billion year on year, driven by sustained strength of its core businesses.

Bank chief executive Antonio Moncupa said Tuesday the first-quarter performance translated into a return on equity of 18 percent.

“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,” Moncupa said.

Moncupa said the bank’s net profit rose despite the increase in its loan loss provisions by ₱1.6 billion to ₱2.4 billion, which was 2.8 times higher from last year in anticipation of the impact of the COVID-19 pandemic to the business.

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.

“We were looking forward to another record year, at least ₱8.0 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,” Moncupa said.

“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. Consumers and businesses, especially MSMEs, need assistance,” he said.

Moncupa said the Philippines fortunately has healthy fundamentals and programs to assist households and businesses to contain the damage were on the table.

“These unfolding programs and the swift, proactive and decisive policy adjustments of the Bangko Sentral ng Pilipinas give us hope that the damage could be managed, and the recovery will be fast. But let’s see how it goes,” he said.

EastWest’s net revenues in the first three months rose 45 percent to ₱9.6 billion from ₱6.6 billion in the same period last year. Net interest income, accounting for 69 percent of revenues, increased 42 percent or ₱1.9 billion.

Net interest margin was at 8.1 percent, 173 bps higher from 2019 as market liquidity and deposit rates normalized. Deposit costs in the early part of 2019 were substantially higher and pushed bank’s margins lower.

Non-interest income rose 52 percent or ₱1.0 billion, mainly driven by securities trading gains.

Meanwhile, operating expenses, excluding provisions for losses, increased by 14 percent to ₱4.6 billion from higher compensation costs. Cost-to-income ratio improved to 48 percent from last year’s 60 percent.

Provisions for losses more than doubled to ₱2.4 billion, mostly in anticipation of the pandemic economic fallout.

Topics: EastWest Banking Corp. , Filinvest Development Corp. , net income
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