EastWest Bank’s income suffers due to stalled DepEd teacher loans
The bank is still reeling from the change in government policies.
EastWest Bank saw its bottom line reach P2.2 billion from January to June 2018, down by 11 percent from a year ago.
The bank’s second-quarter performance was actually stellar as it grew by more than a third, but a sudden shift in state policies caught EastWest by surprise.
The bank run by Filinvest Land said its subsidiary, EastWest Rural Bank, suffered from the decision by government to suspend the automatic payroll deduction system for public school teachers’ loans administered by this lender.
If not for this, EastWest Bank’s net income would have rise by 12 percent.
Still, overall net interest income went up by seven percent to reach P9.6 billion due to bigger consumer loans.
“The increase in consumer loans allowed the Bank to minimize the margin compression that happens when interest rates rise as adjustment in loan rates lag the increase in deposit costs,” the bank owned by the Gotianun family said in a disclosure.
Income from fees and commissions dropped by 23 percent to P2.1 billion while trading income also slipped by a tenth.
Operating costs also rose by 11 percent due to higher documentary stamp taxes.
“The significantly higher deposit costs in the first half pushed the Bank to be more circumspect on its rate sensitive business borrowers. At any rate, we are guardedly optimistic that for the rest of the year, we will be able to resolve the remaining issues on the rural bank lending program to teachers,” said EastWest Bank President Bobby Reyes.
Still, the bank posted a 1.4 percent return on assets and 11.1 percent return on equity, maintaining a very attractive profitability ratio.