FDC nets P2.4B, East West outperforms

East West Bank vice chair and CEO Antonio Moncupa

Gotianun family-led Filinvest Development Corp. grew its first quarter net profit by 9 percent year-on-year to P2.4 billion, led by the strong performance of its banking business under East West Bank.

East West – which now accounts for 40 percent of the group’s business – grew its net profit in the first three months by 54 percent year-on-year to P1.2 billion on account of robust loan growth and improving productivity.

“As we have said previously, we expect to see steady increase in productivity after we have completed our expansion and as our stores mature. Business has been good. We expect revenue growth to continue besting increases in costs. At the rate we are going, a-25 percent increase in income this year to around P4.25 billion is doable,” said Antonio Moncupa Jr., EastWest vice chair and chief executive officer.

The bank’s total assets expanded by 22 percent, driven by the 25-percent expansion in its total loans book. Annualized return on equity was at 13.8 percent while return on assets ended at 1.7 percent.

East West’s total revenues in the first quarter grew by 18 percent year-on-year to P6 billion. Core revenues, or income after taking out volatile trading profits, expanded by 26 percent year-on-year to P5.9 billion. Operating expenses, on the other hand, increased by 13 percent to P3.2 billion.

The bank has now almost tripled its distribution network from 168 at end 2011 to 446 branches at present. “Good things often come with birth pains and difficulties. The thing is to look at the long term,” Moncupa added.

On the funding side, total deposits increased by 26 percent year-on-year, led by the 32-percent growth in low cost deposits. Consumer loans were up by 43 percent. Consumer loans comprised 69 percent of its loan portfolio, making it the most consumer-focused among the country’s universal banks. Given the higher share of the consumer business, it continues to enjoy an industry-leading net interest margin of 7.9 percent.

Meanwhile, trading revenues dropped by 63 percent year-on-year to P166.5 million in the first quarter. “We are a true retail bank where income comes from the old-fashioned loans and deposits business, and not from volatile trading revenues. This means that our business is focused on serving customers well. We are convinced that’s the way to go,” Moncupa said.

COL Financial deputy head of research Charles William Ang said East West Bank’s first quarter performance outperformed market estimates, accounting for 30.6 percent of COL’s forecast and 34.7 percent of market consensus forecast for the first quarter.

“We continue to like East West because of its above average margins and strong growth prospects driven by its large exposure to higher-yielding consumer. Its aggressive branch expansion program over the past year should also start to bear fruit as more branches mature,” Ang said.

At the FDC level, group-wide revenues rose by 17-percent year-on-year to P16.6 billion.

The property businesses – which include real estate subsidiaries Filinvest Land Inc. (FLI), Filinvest Alabang, Inc. and the hotel group – delivered 42 percent of revenues while the power and sugar businesses contributed 13 percent and 4 percent, respectively.

It was earlier reported that Filinvest Land had grown its first quarter net income by 7 percent year-on-year to P1.4 billion a result of strong growth in both residential revenues and rental revenues.