EastWest Bank expects 2022 growth momentum to be sustained this year

EAST WEST Banking Corp. (EastWest Bank) expects its growth momentum to be sustained this year despite a challenging interest rate environment, its new chief executive officer (CEO) said on Monday.

The lender’s growth momentum in the second half of 2022 has continued to the first quarter of this year, newly appointed EastWest Bank CEO Jerry G. Ngo said at a virtual briefing on Monday after the lender’s annual stockholders’ meeting.

“We are very glad to see [that growth has] been consistent. We are obviously hoping this would continue to an even increase in the latter parts of the year… 2023 should be much better than 2022,” Mr. Ngo said.

“We’re very optimistic this year, although it is not without its challenges, the first one being the interest rate environment really affecting all banks in the country. Secondly, we’re also heavily investing in technology, so we [should have] a larger income base to support that kind of continuous investment,” he added.

EastWest Bank saw its net income rise by 2.4% to P4.6 billion in 2022 from the P4.5 billion on the back of double-digit growth in its core revenues amid “the increase in loan releases and buildup of fixed-income securities during the second half of the year in line with the country’s economic recovery,” it said in its annual report disclosed to the stock exchange last week.

This translated to a return on equity of 7.7%, down from 7.9% the year prior. Return on assets was steady at 1.1%, with the bank’s assets growing 4% year on year to P421.4 billion.

“The full-year impact of our 2022 asset buildup will be felt this year in our core income performance. The growth momentum should improve this further as we exceed pre-pandemic asset levels,” Mr. Ngo said in a separate statement.

He said on Monday that the bank is ensuring it has sufficient liquidity to support loan growth amid a high interest rate environment. 

“The overall market has been affected by rising interest rates, and so that’s something we’re very focused on in ensuring we continue to have sufficient liquidity to support loan growth. So far, so good,” Mr. Ngo said. 

He also expects strong growth in the bank’s car loans and consumer loans amid strong pent-up demand.

EastWest Bank’s gross loans increased by 20% to P258.7 billion in 2022 as consumer loans rose amid the economy’s continued recovery.

Consumer loans, which accounted for 73% of the bank’s loan book, grew by 22% to P190 billion as teacher’s loans and credit cards increased by 96% and 24%, respectively.

“The teacher’s loans portfolio grew as private lending institutions were allowed by DepEd (Department of Education) to start offering 5-year term loan to teachers (from 3 years previously). Meanwhile, credit cards portfolio growth was driven by consumer spending that drove retail and installment billings up,” the bank said in its annual report.

“In contrast, auto and mortgage loans declined by P652.5 million combined from [2021], as new loan releases were still not enough to cover for maturities. Personal loans, however, have started growing again towards the end of the year, growing by 9%, driven by demand and normalization of credit policies,” it added.

Meanwhile, corporate loans went up by 13% to P68.7 billion.

Asked about his outlook on interest rates, Mr. Ngo said the Bangko Sentral ng Pilipinas (BSP) may need to keep in step with the US Federal Reserve’s moves to support the peso while considering the current economic situation.

“The BSP is keeping a really good approach so far, there is a big focus on controlling inflation. While there are still talks about interest rate hikes, I think [hikes] would be more subdued. The pace of increases may be more modest going forward,” he said.

The Philippine central bank has raised benchmark interest rates by 425 basis points (bps) since May last year, bringing its policy rate to 6.25%, the highest since 2007.

Meanwhile, the US central bank has hiked borrowing costs by 475 bps since March 2022, with the fed funds rate now at a 4.75%-5% range.

The appointment of Mr. Ngo as the bank’s new CEO came after the retirement of former EastWest Bank President Antonio C. Moncupa, who was with the lender for 16 years, at the end of the 2022.

The bank has appointed new EastWest President Jacqueline S. Fernandez, who assumed her role in the second half of 2022, while Mr. Ngo assumed the CEO position in January 2023. — K.B. Ta-asan