EastWest Bank profit drops

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EastWest
EAST WEST Banking Corp. saw its net income decline 22% in the first quarter. — BW FILE PHOTO

EAST WEST Banking Corp. (EastWest Bank) posted lower net profit in the first quarter on the back of low contributions from its rural bank and security trading arms.

In a disclosure to the Philippine Stock Exchange on Wednesday, the Gotianun-led EastWest Bank said its net income in the January to March period was at P945.4 million, down 22% from the same period last year.

EastWest Bank attributed the lower net income to the “lower contribution from its wholly-owned subsidiary EW Rural Bank and its Securities Trading desks.”

“The Department of Education suspended new loans to teachers pending the renewal of the terms of the [d]epartment’s Automatic Payroll Deduction System (APDS) last November 2017,” the lender said, adding that the move “heavily impacted” EastWest Bank’s rural lender EW Rural Bank (EWRB) as loans to public school teachers was its main business.

“On EWRB, we will continue to work to see how to proceed on the loans to public school teachers,” EastWest Bank President Jesus Roberto S. Reyes was quoted as saying in the statement.

The bank’s total operating income was also down 4.8% last quarter due to the suspension of new loans.

“We remain optimistic this can resume as our loans to public school teachers have the most favorable terms for the borrowers among similar lending program for the public sector,” Mr. Reyes added.

Aside from this, the bank also incurred trading losses of P136.5 million in the first quarter.

The bank’s net interest income, meanwhile, rose 8% to P4.2 billion in the said period on the back of the increase in consumer loans.

Consumer loans of EastWest Bank, which accounted for 73% of its loan book, grew 12% or P17.6 billion, despite the decrease in the loans of public school teachers. Consumer loans net from the public school sector rose 14%, the lender said.

Corporate loans, on the other hand, declined 5% or P2.9 billion in the first quarter.

Total deposits reached P255.4 billion last quarter, up 7% supported by “a healthy mix of CASA (current accounts and savings accounts) and term deposits.”

The bank’s CASA grew to P137.4 billion, while term deposits rose 5% to P117.8 billion.

Overall, the bank’s total assets stood at P316.9 billion as of end-March, 8% higher year-on-year, but lower from the P318 billion logged in the fourth quarter last year.

Operating expenses grew 5% last quarter year-on-year due to higher documentary stamp taxes on time deposits of about P60 million.

Still, capital ratios remained healthy as its capital adequacy ratio and common equity Tier 1 ratio stood at 13.6% and 11.1%, respectively.

“For 2018, the biggest challenge for the [b]ank is the settlement of the DepEd loans. The bank believes that eventually, this will get settled and the bank will be paid on its existing portfolio,” EastWest Bank Vice Chairman and Chief Executive Officer Antonio C. Moncupa, Jr. said, adding that the bank is “still evaluating” if it will continue to lend under the terms of the program.

“Although trading losses occurred early this 2018, we remain hopeful we will continue our track record of not losing for a whole year,” Mr. Reyes noted.

Earlier this year, EastWest Bank said it wants to raise up to P15 billion by selling peso-denominated long-term negotiable certificates of deposit (LTNCD).

The lender said the LTNCD issuance will be used to “diversify its funding sources as part of its overall liability management.”

As of end-December 2017, EastWest Bank was the 13th biggest bank of the country in asset terms.

EastWest Bank shares went down 2.86% or 48 centavos to P16.32 apiece on Wednesday. — K.A.N. Vidal