While earnings of most banks declined due to higher provisions, Gotianun-led EastWest Bank managed to post a 4 percent growth in net income to P6.5 billion last year from P6.2 billion in 2019.
“The pandemic defined EastWest’s operating results in 2020. Lockdowns, social distancing, and limited mobility resulted to the economy contracting by 9.5 percent and appropriately prompted the monetary authorities to loosen financial conditions,” EW Chief Executive Tony Moncupa said.
He noted that, “For EW, this meant lower growth as the uncertainties put resiliency at the top of its agenda. It also resulted in lower volume of new business, less transactions across all businesses, and higher provisions for loan losses.”
On the other hand, Moncupa asid “lower rates and the consequent lower funding costs resulted in higher net interest margins and higher trading gains. These offsetting tendencies drove the flattish operating results of the Bank.”
EW’s net revenues rose 16 percent to P33.4 billion from the previous year. Net interest income was at P26.5 billion, 23 percent higher than 2019, mainly due to lower funding costs.
The Bank sustained its industry leading margins, with net interest margin (NIM) at 8.1 percent.
Total provisions for loan losses were at P9.8 billion, 2.4 times higher from last year’s P4.0 billion and stood at 4 percent of total Loans.
Non-interest income, on the other hand, decreased by 5 percent to P6.9 billion mostly accounted by the decline in fees and other income due to the pandemic induced slowdown in business activities, the Bayanihan Act, and assistance to customers.
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 cashflow relief programs.
The lower fees and cost of the debt relief programs were mitigated by the P4.2 billion increase in Securities Trading Gains.
The pandemic resulted in the global monetary easing that pushed interest rates lower and created opportunities for trading income.
EastWest’s total loans and receivables were down 9 percent to P243.7 billion, mostly due to contractual maturities and lower overall demand as businesses and households held off borrowing due to the pandemic.
Deposits, on the other hand, increased by 8 percent to P329.1 billion, with low-cost CASA increasing by 23 percent to P228.8 billion. The CASA ratio improved to 70 percent, from the previous year’s 61 percent.
“While the Bank has been among the top 3 most profitable universal banks in the last four years, the prospect of a ‘five-peat’ is uncertain for 2021. The shifting contours of the coronavirus pandemic make it difficult to pin down a 2021 income guidance,” said Moncupa.
He added that, “Fortunately, 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.”