EastWest Bank earns 12% lower at P4.5 billion

MANILA, Philippines — East West Banking Corp. recorded a double-digit decline in earnings to P4.5 billion last year from P5.1 billion in 2017 amid higher interest costs and lower trading profits.

The revenues of the Gotianun-led bank was steady at P25.5 billion last year from P25.7 billion in 2017,

EastWest president and deputy chief executive officer Jose Roberto Reyes traced the lower revenue growth “to margin compression due to significantly higher deposit interest cost, lower fixed income trading profits, and almost half year suspension of its rural bank subsidiary’s lending program to teachers.”

The Department of Education suspended early last year its automatic payroll deduction system for loans and insurance payments, preventing EastWest Rural Bank as well as other private lending institutions from extending loans for public school teachers.

The suspension was lifted is June with the issuance of the new guidelines and the reaccreditation of private lending institutions.

“We like to look at our 2018 results as half full rather than half empty. While external developments were on the more challenging side, the bank managed to register a good level of profitability,” Reyes said.

EastWest’s net interest income grew by 4.3 percent to P19.3 billion from P18.5 billion as the growth in its consumer loans offset lower interest margins.

Its auto, credit card, and personal loans portfolio grew by 16 percent as it remained the most consumer-focused universal bank in the country with consumer loans accounting for 70 percent of total loans.

The bank’s net interest margin at 7.4 percent continues to be the highest among universal banks.

EastWest said banks absorbed a significant amount of higher interest costs in 2018 due to tight competition for market share.

As a result, the bank’s fees and commissions contracted by nine percent to P4.9 billion due largely to regulatory changes, particularly the suspension of its rural bank’s lending program and the reduced charges for delayed credit cards payment.

Its trading income and plunged by 34 percent to P502.7 million from P760 million.

The bank’s operating expenses, excluding provisions for loan losses, grew by 10 percent to P15.4 billion from P13.9 billion, almost half of which were due to increased spending in training, advertising, and higher documentary stamp taxes.

On the other hand, provisions for loan losses fell by 16 percent as the bank’s consumer loan portfolio has largely matured.