East West Bank Posts 5% Net Income Growth for Q1

Makati–(PHStocks)–Following its successful IPO, East West Banking Corporation (PSE: EW) announced a 4.9% year-on-year increase in net income for the first quarter of 2012, ending the period with net income after tax of PhP464 million. This translated to an annualized return on average equity of 16.45% and return on average assets of 2.05%, still among the best in the industry.

Total revenues for Q1 was at PhP2.124 billion, higher by PhP544.1 million or 34.4% from the PhP1.58 billion registered in the same period last year.

The PhP544.1 million increase are broken down as follows:

  • PhP272.9 million or 50.2% of the increase was due to the increase in Net Interest Income and Fees and Commissions, excluding trading income. This is 18.1% better compared to 2011 core earnings.
  • Trading income from Fixed Income Securities and Foreign Exchange accounted for 49.8% of the increase in Total Revenues.

The increase in core earnings of Net Interest Income and Fees were due to the following:

  • 14.4% year-on-year expansion of Assets which ended the quarter at PhP86.6 billion.
  • While pressure on spreads continue to weigh on banks as a result of intense competition and low level of interest, EW registered a higher increase in Net Interest Income because its Consumer Portfolio of Credit Cards, Auto, Personal Loans and Morgages continue to post healthy growth. In the first quarter of 2012, EW’s consumer loans portfolio grew by 25.7%.
  • Loans to businesses only grew by 6.6% as the Bank lessened its exposure to low spread bigger corporates and concentrated its efforts to the mid-size corporate borrowers.
  • Current Accounts and Savings Accounts (CA/SA) increased by 22.2% to PhP30.5 billion.

The Bank ended the quarter with 144 branches. This is 31 more from 113 in the first quarter of 2011.

EW’s Operating Costs went up by PhP347 million or an increase by 36.2% to PhP1.3 billion.

  • The increase in expenses was due to the on-going expansion efforts. Manpower related cost increased by PhP52.2 million or 15.6% to PhP387 million. Technology expenses went up by PhP21.6 million or by 119.7%.
  • The bank also ramped up its advertising expenses, which increased by PhP65 million or by 106.3%.

Provisions for doubtful assets went up by PhP243.7 million. The increase was due to the adjustments in 2011, which lowered provisions to PhP80 million, even while NPL ratio improved to 4.36% from 5.76% in 2011.

As of March 31, 2012, capital adequacy ratio stood at 18.1% and tier 1 ratio was at 13.6%.

“What is important to us at this point is to build our revenue base. To do that, we will continue expanding our national footprint of branches and increase our coverage of the consumer and mid-sized corporate lending businesses and further improve customer service. While competition is getting stiffer and the global economic prospects remain uncertain, we remain guardedly positive on the local economic prospects and we will continue with our expansion plans for the year,” said East West Bank President and CEO Antonio C. Moncupa Jr.

East West Bank opened its doors to the public on August 1, 1994. The Bank is a subsidiary of the Filinvest Development Corporation (PSE: FDC), the publicly listed holding company of the Filinvest Group that evolved from a consumer business founded by Andrew L. Gotianun Sr. in 1995. FDC is one of the country’s premier conglomerates, with business interests in real estate, banking, sugar, hospitality & tourism, and power generation. Through the years, East West Bank has successfully capitalized on the financial strength and synergy from the business organizations under the Filinvest Group.

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