EAST WEST Banking Corp. (EastWest Bank) hopes to achieve double-digit net profit growth this year as it expects its net interest margin to widen once the Bangko Sentral ng Pilipinas (BSP) begins its easing cycle, driven by its consumer-heavy loan portfolio, its top official said.
The bank is hoping to sustain the double-digit income growth it posted last year, EastWest Bank Chief Executive Officer Jerry G. Ngo told reporters on the sidelines of the BusinessWorld Economic Forum last week.
The bank saw its net profit rise by 32% year on year to P6.1 billion in 2023.
In the first quarter, EastWest Bank’s attributable net income grew by 7.74% to P1.7 billion, driven by the expansion of its consumer lending business and its digital initiatives.
“I think that (consumer business) will still be the main driver of the business. We’re basically focusing on the consumer lending side. It’s not just a tagline. For us, it’s really important and it’s really very critical. It’s also what sets us apart. Our portfolio is really different. The profile is very different from the rest of the market. So, we want to continue with that,” Mr. Ngo told reporters on the sidelines of the BusinessWorld Economic Forum held last week.
“What we do is we have loans that are fixed. As interest rates go up, our margins are increasing. But as interest rates go down because of the rate cut, that creates liquidity. So, our margins will open. So, interestingly, it’s going to be positive for us,” he said.
He added that the BSP’s easing cycle will likely be dependent on the US Federal Reserve’s actions.
“I think what’s more important is whether they will continue to cut or they will keep it persistently high,” he said, adding that borrowing costs will likely still be elevated despite the expected cuts.
Mr. Ngo said they remain bullish on credit growth in general as the country’s employment has been robust, supported by the online businesses born during the pandemic.
“We don’t see it because it’s not properly captured in national statistics, but the reality is it’s creating an informal economy. So, we want to be able to look at this whole thing holistically. So far, so good. We’re growing both on the secured side as well as on the unsecured side,” he said.
He added that the bank will adjust its products in line with consumers’ shift in preferences, specifically the growing interest in travel.
“I think what’s happening is that the traditional banks like ourselves really need to invest more. You’ve seen it happen in other markets… It’s probably because of interest rates. It’s hard to get expensive deposits. And then in order to make money, you have to lend it at a much higher credit cost. In which case, you’re taking so much risk. And if you don’t have an ability to collect, then it’s hard. So, that’s why we think that there’s an opportunity for a what they call a traditional bank that is digitally enabled that supports and embraces all of those capabilities, to really level up, as they say,” Mr. Ngo said.
“Obviously, we’re going to have to invest more in order to have a higher growth trajectory. So, that’s the balance that we need to keep. We need to keep our investors happy. As I mentioned earlier, there’s a lot of people, particularly in the investment community, that are looking for profitability. They need returns,” he added.
EastWest Bank is looking to make its digital wallet app Komo available to more types of clients by integrating it into EasyWay, its digital banking app, Mr. Ngo said.
“What you want to be able to do is to get people to use the e-wallet like what you have in your pockets day to day — small amounts, more transactional as a wallet. The ones that you want to do — investments, insurance, and other longer-term transactions — you do it in the bank… That allows for protection. You do not carry your entire wealth every day in a wallet, because otherwise, you will have a problem,” he said.
To boost its profits, the bank is also tapping the affluent market and the micro, small, and medium enterprises market, he added.
EastWest Bank will also expand its services and branches to areas outside of Metro Manila, he said.
“We will let our customers lead. We will work with our customers, but we will focus on a very defined strategy,” Mr. Ngo said.
EastWest Bank’s shares closed at P9.24 apiece on Tuesday, up by four centavos or 0.43% from the previous day’s finish. — AMCS
