EastWest Bank (EW) reported a 75 percent plunge in net income to P507.6 million for the first three months of 2022 from the P2.0 billion earned in the same period last year.
In a disclosure to the Philippine Stock Exchange, the bank said its profits fell primarily due to lower fixed-income trading revenues and lower income from loans.
However, EW said it is keeping its profit guidance for 2022 at around P4.0 billion, near its 2021 income. EW’s total revenues declined by P2.0 billion or 26 percent, to P5.8 billion.
Total trading revenues dropped by P1.1 billion as global and local interest rates increased, even as the Bank kept a lower level of fixed-income securities. EW has 12 percent of its assets in fixed-income investments compared to the industry average of 26 percent.
“The Bank remains cautious on its investment activities and is keeping a higher level of liquidity as we watch the development in the interest rate market,” EW Senior Executive Vice President and Head of Treasury and Markets, Raffy Algarra said.
He noted though that, “once we deploy the excess liquidity into higher-yielding securities, we expect to generate additional annual revenue of at least P2.0 billion.”
Meanwhile, net interest income for the first three months of 2022 stood at P5.2 billion, 12 percent lower than the previous year, due to lower loan levels and fixed-income income securities.
In addition, the Bank’s consumer loans declined by 11.0 percent in the last 12 months as bookings remained lower than customer loan pay downs.
“The Bank has resumed its loan rebuilding activities, with 100percent of our workforce back to office work. We expect our consumer loan portfolio to start showing net increases in the next two months,” EW Chief Lending Officer Jackie Fernandez said.
Although the bank's first quarter was weak due to the lag effect of the pandemic, Fernandez said that its consumer-focused balance sheet bucked the trend, and allowed the Bank to book higher income while the overall industry was going lower in 2020.
“We now have the reverse. Our first quarter declined while the industry as a whole increased as the full impact of the consumer decline is fully manifesting,” Fernandez said.
“We expect to align with the industry trend as the pandemic wanes, and the economy returns to higher growth. We expect 2022 core income to be around 2021 levels and get back to double-digit equity return in 2023,” Fernandez said.
EastWest Bank’s total assets as of March 2022 stood at P404.2 billion, or 5 percent higher than the same period last year.
Likewise, total deposits grew by 5 percent to P323.9 billion, driven by CASA deposit growth of 14 percent to P245.3 billion. CASA ratio improved to 75 percent from the previous year’s 70 percent.
The bank’s capital ratios improved to 15.2 percent and 14.0 percent for Capital Adequacy Ratio (CAR) and Common Equity Tier 1 (CET1) ratios, well above regulatory standards.
The bank expects to deploy its excess capital to rebuild its loan portfolio while maintaining its target CET1 ratio of 12 to 13 percent.