November 18, 2013

EastWest Bank nets P1.7b in 9M13

EastWest Bank (EW, Buy) yesterday disclosed 9M13 net income of P1.7b, up 28% YoY. This was driven by the 41% growth in net interest income (P6.1b) and the 35% rise in non-interest income (P4.3b). Consumer and corporate loans expanded 35% and 47% YoY, respectively. Total bank assets grew 31% while deposits increased 37%. Low-cost deposits growth (+56%) outpaced the 20% growth of high-cost deposits.

Thus, net interest margin improved to 8.3%, which is roughly 2x the industry average. Meanwhile, operating expenses increased 31% (P6b) as the bank incurred additional costs related to its aggressive branch expansion program. The bank now has a total of 347 branches. It aims to increase its branch count to 400 by 1Q14 from only 122 in end-2011.

Our take: EW's 9M13 earnings accounted for 70% of our full-year forecasts. We continue to like the bank for its growth story amid improving margins on healthy loan growth that is financed by rising contribution of low-cost deposits. This should justify the relatively high costs related to its aggressive branch expansion program. . - WealthSec