East West Banking Corporation’s net income fell 60.5 percent to P1.5 billion in the first half of the year from the P3.8 billion it earned in the same period of 2021, mainly due to the drop in fixed-income trading revenues.
In a disclosure to the Philippine Stock Exchange, the bank said gross revenues dropped 16 percent to P12.6 billion in the first half of 2022 from P15 billion in the same period last year.
Its core revenues, which exclude the volatile trading income, were 5 percent lower at P12.7 billion than 2021’s P13.4 billion Year-on-Year (YoY) mainly due to lower average loan volumes.
“The P1.7 billion drop in fixed income trading was due to the global rise in interest rates as monetary authorities ramped up efforts to contain inflation,” EastWest Bank said.
It added that, “The change was also magnified as the previous year’s P1.3 billion trading gains were higher than usual, while first quarter 2022 was a loss of P420.7 million from the normal positive numbers.” Net interest income stood at P11.0 billion, declining by 4 percent from last year’s P11.5 billion. The decline was partly offset by the reduction in interest expense of 7 percent or P83.2 million.
Interest income on loans declined by 10 percent to P10.5 billion driven mainly by the lower volume of consumer loans while interest income on securities increased by 77 percent to P1.3 billion mainly from the accrual portfolio build-up.
Interest expense on deposits declined by 8 percent to P843.4 million from lower time deposit expenses.
Fees and other income, excluding trading gains, were at P1.7 billion which was 15 percent lower than last year’s, mainly due to lower late payment charges partly offset by lower losses on sale of real and other properties acquired (ROPA).
Securities trading and foreign exchange activities posted a loss of P87.7 million compared to the P1.6 billion gain last year. Securities trading losses were at P420.7 million, significantly lower than the P1.3 billion gain from last year.
The wide variance is a result of the base effect as trading income for 2021 was higher than usual due to the sale of hold-to-collect investment securities amounting to P1.9 billion.
Also, in 2021, the trading gains were higher than the long-term average as low interest rates were maintained after the substantial reduction early in the pandemic. In 2022, interest rates moved higher resulting in the unusual trading loss.
“Given current trends and second quarter results, for 2022, we now expect total revenues, excluding trading, at P26 billion from the P25 billion guidance in the first quarter,” EW President Jacqueline Fernandez said.
She added that, “However, with the uncertain trading income, we still expect net income at around P4.0 billion. By the fourth quarter, EW quarterly income, ex-trading, should have recovered pre-pandemic levels and trend towards P1.25 billion, or P5.0 billion on an annualized basis.”
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