Despite hike in credit loss provisions, Eastwest posts 2020 4% profit growth

GOTIANUN-LED East West Banking Corp. grew its net income by 4 percent in the past year despite increasing its credit loss provisions by more than twofold in anticipation of potential bad loans.

In a disclosure on Wednesday, the listed bank announced that it earned P6.5 billion last year, which is higher than the P6.2 billion in 2019. Return on equity stood at 12.3 percent.

This, even though it hiked the total loan loss buffer to P9.8 billion—representing 4 percent of the total loan portfolio—last year from P4 billion in 2019.

The day of the disclosure saw Eastwest’s shares inch up by 0.53 percent, or 5 centavos, to close at P9.56 each amid the 0.12-percent uptick for the benchmark index on Wednesday.

The bank said its net revenues grew by 16 percent to P33.4 billion for the period. This was supported by net interest income, which improved by 23 percent to P26.5 billion because of lower funding costs. Net interest margin was at 8.1 percent.

“[Lower] rates and the consequent lower funding costs resulted in higher net interest margins and higher trading gains,” Eastwest CEO Antonio C. Moncupa Jr. was quoted in the disclosure as saying.

Non-interest income fell by 5 percent to P6.9 billion due to decrease in fees and other income amid the slowdown in business activities. Securities trading gains amounted to P4.2 billion for the period.

Operating expenses, excluding provisions for losses, slightly declined by 1 percent to P16.2 billion.

“The bank booked a P2.7 billion ‘modification loss’ or the value of the assistance given to loan borrowers over the life of their loans that arose from the mandated and bank initiated cash-flow relief programs,” it added.

Loans and receivables were lower by 9 percent to P243.7 billion last year because of contractual maturities and dampened demand for borrowing. Deposits, meanwhile, climbed by 8 percent to P329.1 billion.

As of end-december, the bank’s assets stood at P408.2 billion. Capital adequacy ratio and common equity tier 1 ratio stood at 13.8 percent and 12.6 percent, respectively.

“[The] bank, with its higher capital buffers and the loan loss provisions in 2020, is in a good position to face the remaining pandemic challenges and the rebuilding that will follow the vaccines,” Moncupa said.