East West Bank sees P1.8B profit this year

MANILA, Philippines—Gotianun-led East West Bank sees its 2012 net profit hitting P1.8 billion on the back of a double-digit growth in loans and an above-industry loan margin.

Based on materials disclosed to the Philippine Stock Exchange on Wednesday, EWB sees loans expanding by 35 to 40 percent this year. In April, when the bank was doing its road show for its stock debut, the target loan growth for this year was only 20-25 percent.

Alongside the faster-than-expected loan expansion, the bank’s net interest margins are seen settling at 5 percent.

In the first semester, the bank’s net profit grew by 3 percent year on year to P910.5 million, translating to a return on average equity of 13.1 percent. This put the bank on track with its full-year profit guidance. Last year, net profit amounted to about P1.7 billion.

In terms of portfolio mix, more than half of the portfolio was still in consumer lending.

This year, the bank said it started tapping into affiliate property firm Filinvest Land’s “more mature” portfolio, so far purchasing around P1 billion in receivables. “We’ll continue to work with FLI on increasing our mortgage book,” the bank said.

On Basel III, East West bank said its current projections showed that it would be compliant with this global adequacy framework by the time the Bangko Sentral ng Pilipinas implements it in 2014. “We are currently revisiting our financial projections to firm up when we’ll need additional capital,” the bank said. Basel III introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

The bank expects return on equity (ROE) to average 12 percent in 2012 due to its branch-expansion program as well as the additional capital raised early this year. But its medium- to long-term target is to attain an ROE of at least 15 percent.

After getting its universal license upgrade from the BSP, the bank said its current focus would still be in core banking operations but added that it was studying the feasibility of entering investment banking and leasing.

East West Bank last year took advantage of the BSP’s temporary liberalization of branch licensing in restricted areas ahead of the 2014 full liberalization. The bank is expected to have a significant presence in eight restricted areas within the National Capital Region by 2014, complemented by a nationwide footprint totaling at least 350 branches.

The bank has 193 branches as of October 19. New branches opened this year totaled 71. Average capital spending for each new branch is P7.1 million.