La Consolacion University Philippines

Valenzuela St., Capitol View Parl Subd., Malolos, 3000 Bulacan

Submitted by:
Bautista, Lavinia Angela (Researcher: EastWest Income Statement & Investor
View)
Dela Cruz, Marithe Nicole (Researcher: EastWest 2018 Annual Report &
Investor View)
Fajardo, Gisell (Researcher: EastWest Income Statement & Investor View)
Gregorio, Christine Joy A. (Researcher: EastWest Income Annually, Compiler
& Interpreter)
Maningding, Kaseylyn (Researcher: EastWest Income Annually & Interpreter)
Mongcopa, Veronica (Researcher: EastWest 2018 Annual Report & Investor
View)

Submitted to:
Sir Paul Mora
THE BIRTH OF EASTWEST BANK

Established on July 6, 1994, EastWest Bank was the first recipient of a

commercial banking license after the central monetary authority liberalized
banking in the mid-1990s. Its first branch was opened along Sen. Gil Puyat
Avenue in Makati City on August 1, 1994.

Its name is the result of the bank's desire to combine the traditional
prudence, warmth and hospitality of the East and the efficiency and progressive-
thinking of the West.

Since then, EastWest Bank has made its presence known in the banking
industry through steady growth. The bank offered products and services via
traditional and alternative delivery channels, and opened more branches to make
banking accessible and convenient for its clients. It later introduced internet
banking facility to expand delivery channels for its products and services.

EastWest is a subsidiary of the Filinvest Development Corporation

(FDC), one of the country's leading conglomerates, with interests in banking,
real estate, hospitality and tourism, power generation and sugar.

Filinvest Development Corporation

(FDC) was incorporated on April 27,
1973, and in 1984, the Gotianun
family consolidated their real estate
interests in FDC after divesting their
shares in two family-owned banks,
namely, Family Bank and Trust
Company and the Insular Bank of Asia and America.

By 1990, the Company expanded its product line to include the construction
and sale of low-cost and medium-cost housing units. The product line was
further extended to include the development of commercial district, leisure
projects such as farm estates and sports clubs, and construction of residential
and office condominiums.

Through its subsidiaries, the Company is also involved in mall, theater, and
resort hotel operations, banking and financial services, sugar farming and
milling, and power generation. Among FDC's operating hospitality projects are
the Crimson Resort and Spa Mactan, Crimson Hotel in Filinvest City, Alabang,
Quest Hotel and Conference Centers in Cebu and Clark, and Mimosa Golf in
Clark.

Presently, FDC's subsidiaries include Filinvest Alabang, Inc.; Filinvest Land,

Inc.; Chroma Hospitality, Inc.; Filinvest Hospitality Corporation; Seascapes
Resorts, Inc.; East West Banking Corporation; Pacific Sugar Holdings
Corporation; FDC Utilities, Inc.; Filinvest Development Cayman Islands; and
Countrywide Water Service, Inc., among others.

Statement of Income
Consolidated Parent Company
Years Ended December 31
2018 2017 2016 2018 2017 2016
di
INTEREST INCOME
Loans and receivables (Notes 9 and 27) P=23,108,1 P=21,087,4 P=17,377,3 P=21,578,4 P=19,270,4 P=16,082,
Financial Assets at Fair Value Through Other 72 98 57 52 69 377
Comprehensive Income and Investment 1,029,352 507,051 450,821 1,029,352 507,051 450,821
Securities at Amortized Cost (Note 8)
Financial Assets at Fair Value Through Profit or 118,827 315,107 348,808 118,827 315,107 348,808
Loss (Note 8)
Due from other banks and interbank loans
receivable 101,759 110,353 40,115 100,011 108,830 39,987
24,358,110 22,020,009 18,217,101 22,826,642 20,201,457 16,921,993

The interest income from loan borrowed to EastWest (Consolidated) in year 2016
totals to Php17.3B, from the year 2017 it totals up to Php21B and from the year
2018 it earned Php23.1B, so as the Parent Company increases from profit from
Php16B (2016) to Php21.5B (2018). In Comprehensive Income and Investment
Securities at Amortized EastWest (Consolidated and Parent Company) gross
increases from Php450.8M (2016) to Php1B (2018). From the Fair Value through
ProfitEXPENSE
INTEREST or Loss EastWest (Consolidated and Parent Company) produce Php348.8M 2,278,60
Deposit liabilities (Note 16) 4,523,538 3,160,777 2,458,922 4,016,671 2,833,700 9
(2016)debt,
Subordinated andbillsdecreases
payable andtoother
Php118.8M (2018). EastWest income due from other
borrowings (Notes 17 and 19) 557,073 408,602 358,941 487,242 349,034 358,941
banks/international bank loans5,080,611 increases from Php40M
3,569,379 2,817,863
(2016)
4,503,913
to 3,182,734
Php101.7M 2,637,55
(2018). The interest income of EastWest Bank increases from Php18.2B (2016) 0

to Php24.3B (2018) in Consolidated, whereas the Parent Company also

increases duties,
EastWest from Php16.9B
obligations (2016)
and to Php22.8B
liabilities (2018).
(Consolidated) increases from Php2.5B
(2016) to Php4.5B, likewise the Parent Company increases from Php2.3B to Php4B.
Subordinated debt, bills and other borrowings also increases (Consolidated) from
Php2.8B (2016) to Php5B (2018). The interest expense of EastWest Bank increases
from Php2.8B (2016) to Php5B (2018) in Consolidated, whereas the Parent
NETCompany
INTEREST INCOME also increases from19,277,499
Php2.6B18,450,630
(2016) to15,399,238
Php4.5B18,322,729
(2018). 17,018,723
Thus, the14,284,44
total
3
Net
Service Interest
charges, Income (Note
fees and commissions increases
23) with Php3.9B
4,888,450 from4,101,341
5,342,776 2016 – 2018.
4,126,139 3,853,564 3,189,11
4
Foreign exchange gain 738,597 378,705 176,957 738,597 378,705 176,957
Gain on sale of assets (Notes 11,12 and 14) 139,087 55,892 56,124 139,039 53,278 55,05
9
Trust income (Note 28) 51,333 46,759 18,602 51,333 46,759 18,60
2
Gain on capital transaction (Note 10) − 665,000 1,005,000 − 665,000 1,005,00
0
Gain on sale of investment securities at amortized
cost (Note 8) − 317,443 − − 317,443 −
 Loss on asset foreclosure and dacion transactions (212,896) (236,353) (29,454) (212,896) (236,353) (29,454)
Trading and securities gain (loss) (Note 8) (235,917) 63,973 734,499 (235,917) 63,973 734,499
Miscellaneous (Note 23) 851,075 568,738 469,718 844,764 545,299 457,335
19,891,55
TOTAL OPERATING INCOME 25,497,228 25,653,563 21,932,025 23,773,788 22,706,391 5

OPERATING EXPENSES
Compensation and fringe benefits 3,706,51
(Notes 23 and 27) 4,986,802 4,608,745 4,009,859 4,591,278 4,198,748 2
Provision for impairment and credit losses 5,659,81
(Notes 9, 12, 14 and 15) 3,905,928 4,464,267 5,692,223 3,848,772 4,332,113 9
Taxes and licenses 2,326,683 1,980,710 1,520,722 2,053,250 1,729,062 1,341,09
1
Depreciation and amortization
(Notes 11, 12 and 14) 1,077,209 1,056,234 974,771 961,611 939,894 889,443
Rent (Note 26) 1,037,898 952,335 873,118 958,992 872,943 815,401
Amortization of intangible assets (Note 13) 188,061 339,874 175,251 170,158 325,566 163,038
Miscellaneous (Note 23) 5,602,526 5,044,457 4,187,414 5,286,481 4,770,978 3,983,02
0
16,558,32
TOTAL OPERATING EXPENSES 19,125,107 18,446,622 17,433,358 17,870,542 17,169,304 4

The amount of profit of EastWest Banking Corp. operations totality increases from
Php21.9B (2016) to Php25.5B (2018) in Consolidated, whereas the Parent Company
also experience an increase in income from Php19.9B (2016) to Php23.8B (2018).
The amount of deduction (such as compensation, benefits, credit losses, taxes,
miscellaneous etc.) also increases, in Consolidated from Php17.4B (2016) to
Php19.1B (2018) whereas the Parent slightly increases from Php16.6B (2016) to
Php17.9B (2018). Thus, the total increases with Php1.9B from 2016 – 2018.

INCOME BEFORE SHARE IN NET INCOME

OF SUBSIDIARIES AND JOINT 3,333,23
VENTURE 6,372,121 7,206,941 4,498,667 5,903,246 5,537,087 1
SHARE IN NET INCOME OF SUBSIDIARIES
(Note 10)
− − − 241,520 1,181,247 775,405
SHARE IN NET LOSS OF A JOINT
VENTURE (Note 10) (395,816) (449,050) (356,954) (395,816) (449,050) (356,954)
INCOME BEFORE INCOME TAX 5,976,305 6,757,891 4,141,713 5,748,950 6,269,284 3,751,68
2
PROVISION FOR INCOME TAX (Note 24) 1,468,241 1,707,192 733,957 1,240,886 1,218,585 343,926
P=3,407,7
NET INCOME P=4,508,064 P=5,050,699 P=3,407,756 P=4,508,064 P=5,050,699 56

Deducting the share net loss of joint venture, income before income tax and income
tax to the net income subsidiaries in consolidated data the net income increases
between the year 2016 & 2017 from Php3.4B to Php5B, while in 2018 it decreases
from
Basic Php5B
Earnings Per Share (net income
Attributable to of 2017) to Php4.5B. On the other hand, the Parent
Company similarly experiences theP=2.0
Equity Holders of the Parent Company increasesP=2.2
of netP=1.51
income by the year 2016 – 2017
(Note 30)
andEarnings
Diluted decreases fromAttributable
Per Share the yearto2018. 0 4
Equity Holders of the Parent Company
(Note 30) P=2.0 P=2.2 P=1.51
0 4

See accompanying Notes to Financial Statements.

Statements of Comprehensive Income

Consolidated Parent Company
Years Ended December 31
2018 2017 2016 2018 2017 2016
 (Amounts in Thousands)
P=5,050,69 P=3,407,75 P=4,508,06 P=5,050,69 P=3,407,7
NET INCOME FOR THE YEAR P=4,508,064 9 6 4 9 56

OTHER COMPREHENSIVE INCOME

(LOSS) FOR THE YEAR,
NET OF TAX
Items that will not be reclassified to profit or
loss in subsequent periods:
Change in remeasurement gains (losses)
of retirement liability (Note 25) (110,124) 101,215 (23,063) (109,638) 101,084 (24,378)
Change in net unrealized gains (losses)
on equity securities at fair value
through other comprehensive income
(Note 8) (1) 12 (1,618) (1) 12 (1,618)
Share in changes in remeasurement
gain (loss) of retirement liabilities 1,31
of subsidiaries (Notes 10 and 25) − − − (486) 131 5
Items that may be reclassified to profit or loss
in subsequent periods:
Change in net unrealized losses on debt
securities at fair value
through other comprehensive income
(Note 8) (6,244) − − (6,244) − −
Cumulative translation adjustment (98,084) (95,781) 63,549 (98,084) (95,781) 63,54
9

TOTAL OTHER COMPREHENSIVE 38,86

INCOME (LOSS) (214,453) 5,446 38,868 (214,453) 5,446 8

TOTAL COMPREHENSIVE INCOME, P=4,293,61 P=5,056,14 P=3,446,62 P=4,293,61 P=5,056,14 P=3,446,6

NET OF TAX 1 5 4 1 5 24
See accompanying Notes to Financial Statements.
INTERPRETATION:

From the year 2016 to 2017 East West Banking Corp. net interest income
and fee-based income grew 19.8% and 29.2%, respectively. East West Bank
earned a Php5.1-billion bottom line in 2017, 48% higher than the Php3.4 billion
logged the previous year. However, According to Philippine Daily Inquirer
(2019) East West booked a lower net income in 2018 as its net revenues
declined slightly due to margin compression. Net revenue from 2018 was
Php25.5 billion, flat from the level in 2017 – by 11.8% lower. It decreases from
Php5.1-billion to Php4.3-billion. This was attributed by Reyes to “margin
compression due to significantly higher deposit interest cost, lower fixed
income trading profits and almost half year suspension of its rural bank
subsidiary’s lending program to teachers.”

WILL WE INVEST OR NOT?

As investors, we would invest

in EastWest Banking Corp. according
to our research, the years 2016 to
2017 were its best years. Its net
income rose by Php3.4B to Php5.1B.
Although during 2018 there was a
decrease by 10.8% due to the margin
compression; owing to the significantly higher deposit interest cost, lower fixed
income trading profits and almost half a year suspension of its rural bank
subsidiary's lending program to teachers. It is still a good investment because of
its net income that rises to billions. Although there was a drop it is not great
enough to be considered a loss for both parties. It is still safe to invest from
EastWest Bank since they provide liquidity and stable income, whereas the
Corporation put an assurance in increasing by the year 2019 and coming years.
It is not bad to have a moderate risk profile since it is willing to accept periods
of market volatility in exchange for the possibility of receiving returns that will
outperform inflation by a significant margin in the long run.

o EastWest Bank 2019 Annual Report

o Filinvest Development Corporation Page
o Inquirer.Net (March 2019)
o Business World (March 2019)