EastWest Bank’s ‘Expansion to Significance’ on track; 1H 2016 profits up 55%

East West Banking Corporation (EastWest Bank) posted a first semester net income of Php1.56 billion, 55% higher than the Php1.01 billion profits booked in the same period last year, on the back of sustained growth in its core business of loans and deposits. The bank attributes its continued growth momentum to its bigger store network, now 440 nationwide to date—the 5th largest in the industry, excluding subsidiaries, and 7th overall, including subsidiaries.

“We are happy to note that what we communicated to our stakeholders when we started this ‘expansion to significance’ in 2012, is moving according to script. We believe the worst pain is over and we should see better results starting this year,” said EastWest Bank President and CEO Antonio C. Moncupa, Jr.

Eastwest embarked on an aggressive expansion of its branches, which they call stores, in 2012. It saw it’s unibank store network grow from 122 as of end-2011 to 245 in 2012 to 382 today. Its rural bank subsidiary, meanwhile, now has 58 stores. Due to the heavy costs of this expansion, the bank’s profits have been flat in the last 3 years at around Php2.0 billion. During its IPO in May 2012, the bank told investors to expect subdued profitability in the next few years as it builds scale and bears the upfront costs of the expansion plan. It also mentioned that it is something it has to do as retail banking is a business of scale. After initially going to as high as Php37.00, the listed bank’s share price has gone down to as low as Php14.34. It now trades at Php20.65.

Loans grew 36% year-on-year to Php177.55 billion. Consumer loans continued to drive loan growth, rising 50% to Php111.90 billion. Corporate loans increased 17% to Php65.65 billion. Deposits increased 30% to Php206.27 billion, supported by a 24% growth in low-cost checking and savings deposits.

Core recurring earnings, which is income before trading and one-off income and expense items, increased 29% to Php9.49 billion. Net interest income grew 26% to Php7.35 billion amid the robust increase in loans and bigger and better deposit profile which allowed EastWest Bank to retain its industry leading net interest margin of 7.8% as of end-June.

Non-interest income rose 47% to Php3.06 billion, buoyed by higher trading gains, which grew 71% to Php918 million as the bank was able to take advantage of market developments.

“We have yet to optimize our infrastructure and our much bigger organization to improve productivity. At the front and center of this effort is to continue to offer better value and great services to our customers. We now have completed our product menu as our bancassurance, non-life insurance, and wealth management, are in full operating mode and leasing will soon be offered,” said Moncupa.

The bank’s joint venture with Belgium-based Ageas Insurance, now branded ‘Troo’, had begun its bancassurance operations last April. EastWest also formed an insurance brokerage, EastWest Insurance Brokerage, Inc., and had recently secured BSP approval to operate a leasing subsidiary, EastWest Leasing and Finance Corporation.

Last May, EastWest Bank entered into an agreement with Standard Chartered Bank Philippines (SCB PH). Under the agreement, the retail banking business of SCB PH which includes credit cards, personal loans, wealth management and retail deposits, will be migrated to EastWest Bank.