ABOUT THE THEME When you take care of your customer, anticipate their every need, address their concerns, and take everything to heart, they will repay you with their loyalty and gratitude. This is why EastWest believes in being HEARTSTRONG — both in leading and serving the customer, as well as all EastWestbankers. To achieve our goal, we recognize the strength of being patient, kind, and compassionate, for these are what will come around and bear fruit. Beyond being a customer service approach, HEARTSTRONG also means a sharper focus, a deeper commitment to serving the Filipino. It is the agility and awareness to learn from every challenge. It is the steadfast dedication to excellence. With all these, EastWest commits to building a stronger heart for you. BRAND PILLARS SERVICE PILLARS • Insightful expertise directed PERSONABLE - Warm and positive attitude, genuine towards your priorities sentiment, and personal concern for the customer’s well-being and business affairs • Dedication to making banking easier for you DEPENDABLE - Dedicated to making banking as easy as possible for the customer — taking the effort away • Entrepreneurial spirit to realize whenever we can but with professional regard for due our collective best potential process PROACTIVE - Actively listening, offering the right information at the right time, considering what the customer needs with thoughtful cross-selling CONTENTS 1 About EastWest Bank / Vision Mission 60 Senior Management 2 Financial Highlights 66 Senior Officers 3 Financial Highlights 68 Subsidiaries and Affiliate 4 Key Performance Indicators 74 Capital Adequacy 8 Q&A with the Vice Chairman & CEO 78 Risk Exposure 14 Q&A with the President & Deputy CEO 86 Products and Services 20 Operational Highlights 88 EastWest Store Network 28 Our People and the Community 103 EastWest Rural Bank Store Network 34 Consumer Protection 106 Off-site ATM Network 38 Risk Management 111 Audited Financial Statements 42 Corporate Governance 54 Board of Directors ABOUT EASTWEST East West Banking Corporation (EastWest) is one conglomerates with a diverse range of interests of the largest universal banks in the Philippines from real estate, banking, sugar, hospitality, power today. We cater to the financial needs of consumers, generation to infrastructure. Since 2012, EastWest middle-market clients, and the mass affluent. has been trading under the symbol ‘EW’ in the Philippine Stock Exchange (PSE). Our multiple customer touch points include our network of 466 stores, of which 390 are EastWest As of end-2018, EastWest had 6,431 full-time parent bank stores and 76 are stores of EastWest employees compared to 5,842 in 2017. Rural Bank, 583 ATMs nationwide, internet EastWest’s subsidiaries have 1,096 employees, banking for individuals and corporates (EastWest bringing the combined manpower to 7,527. Online), mobile banking (EastWest Mobile), phone banking, and 24/7 EastWest Customer Service. For more information, visit www.ewbanker.com. EastWest is a subsidiary of Filinvest Development Corporation (FDC), one of the country’s leading VISION To be a world-class bank anchored on service excellence in our chosen markets MISSION To create value: For our chosen markets, by providing them with excellent service in the delivery of integrated and innovative products, responsive to their current and future financial needs, at the best value For our employees, by continuously providing them with opportunities to develop their full potential and by giving recognition and rewards commensurate to their contribution For our community, by committing ourselves to improving the quality of life of those around us through the support for various charities and involvement in outreach activities For our regulators, by uncompromisingly adhering to the highest standards of business ethics and corporate governance For our shareholders, by managing the bank professionally and prudently to consistently achieve optimal possible returns 2018 ANNUAL REPORT 1 FINANCIAL HIGHLIGHTS NET INCOME ASSETS in Billions Php in Billions Php Net Income 5.1 Php4.5B 3 6 7. 3 4.5 3 1 7. 6 291.8 3.4 232.9 2.1 188.3 Assets 2.0 14 15 16 17 18 14 15 16 17 18 Php3 6 7. 3 B LOANS DEPOSITS Loans in Billions Php in Billions Php Php246.8B 246.8 288.2 223.5 258.7 201.8 240.2 1 5 7. 0 184.1 122.1 Deposits 1 4 7.7 Php288.2B 14 15 16 17 18 14 15 16 17 18 Capital CAPITAL STORE NETWORK Php42.8B in Billions Php 445 446 433 466 42.7 405 38.8 34.4 Store Network 31.4 466Stores 21.4 14 15 16 17 18 14 15 16 17 18 2 EASTWEST 2018 ANNUAL REPORT 3 SUMMARY KEY OF FINANCIALS AND RATIOS 2018 2017 Profitability (In millions Php) Net Interest Income 19,277 18,451 Trading Income 503 760 Fees & Other Income 5,717 6,443 Net Revenues 25,497 25,654 Operating Expenses 15,219 13,982 Provision for Losses 3,906 4,464 Provision for Taxes 1,468 1,707 Net Income 4,508 5,051 Balance Sheet Data (In millions Php) Assets 367,339 317,643 Consumer Loans 173,251 159,998 Corporate Loans 73,482 63,469 Low Cost Deposits (CASA) 145,527 143,454 High Cost Deposits 142,712 115,272 Capital 42,657 39,006 Key Financial Ratios (in %) Return on Equity 11.0 13.8 Return on Assets 1.4 1.7 Net Interest Margin 7. 4 7.8 Cost-to-Income Ratio 60.6 55.5 Capital Adequacy Ratio 12.8 14.0 Per common share data (in Php) Net Income Per Share: Basic 2.0 3.4 Diluted 2.0 3.4 Book Value Per Share 19.1 26.0 Others Cash Dividends Declared (in millions Php) - 500 Stock Dividends Declared (in millions Php) 7, 5 0 0 - Headcount 7,527 7,035 Officers 3,044 2,812 Staff 4,483 4,223 3 2 EASTWEST 2018 ANNUAL REPORT 3 JONATHAN T. GOTIANUN Chairman 4 EASTWEST 2018 ANNUAL REPORT 5 MESSAGE FROM THE CHAIRMAN For EastWest, meeting these emerging challenges in our operating environment while also making the most of the opportunities demands a strong and tenacious heart that is ignited by a genuine desire to please our customers. In 2018, we called this being HEARTSTRONG. A heart that beats for the customer The Philippine economy continued to pick up in 2018, albeit at a slower pace than the previous year, due to rising inflation and interest rates, and a wealth of other external factors. At 6.2% GDP growth though, it is still among the fastest-growing economies in Asia next to India, Vietnam, and China. It could have been much higher except that inflation concerns, that peaked in the third quarter, tempered household consumption and investment spending. While certain sectors, such as overseas Filipino workers’ remittances and business pro- cess outsourcing, remained robust, others remained under pressure. For the local banking industry, growing regulation, changing consumer preferences, increasingly complex information technology requirements, and disruptive technol- ogies, continue to challenge traditional business models. These changes, however, also offer new opportunities for growth. 4 EASTWEST 2018 ANNUAL REPORT 5 MESSAGE FROM THE CHAIRMAN For EastWest, meeting these emerging challenges To make customer service excellence our differentiat- in our operating environment while also making the ing factor, not just a buzzword, each of us must have most of the opportunities demands a strong and the “3 Ms”: Maingat (careful with details), Maalaga tenacious heart that is ignited by a genuine desire to (caring), and Maasikaso (attentive). Embedding these please our customers. In 2018, we called this being “3 Ms” in our corporate culture remains a work in HEARTSTRONG. progress, but we need to ensure that our corporate values are aligned with those of our people. Beyond buzzword This “people project” is particularly critical to our five- For us, this means remaining steadfast in our mission year plan. We cannot achieve our goals overnight to be a world-class bank anchored on service excel- and suddenly wake up in the top quartile of our peers. lence in our chosen markets. We pay close attention to retaining the right individu- als with the right values toward our customers. We recognize, however, that keeping our customers satisfied with our service requires a multi-dimension- Equally important is how we are able to complement al approach. We focus on making our people more the skills and strength of our people with technology. competent and effective in their roles. We develop Like most banks these days, we are increasing our fo- and equip them to become more effective and knowl- cus on digitalizing our business processes to improve edgeable, not just to sell our products and services, customer experience. This does not mean, however, but to understand our customers’ needs and promptly that we will be pivoting away from our stores. We address them. see a future where digital and stores complement each other for the greater benefit of customers. We More than training our frontliners, we develop our are bent on hastening the maturity of our EastWest leaders. Good leaders retain good people by anchor- stores, intensifying deposit generation, closing pro- ing on a common set of values and by driving efforts ductivity gaps, and increasing our share of wallet. towards the Bank’s objective on Growth and Profit- ability that is Sustainable (our GPS). Heartstrong today and tomorrow Beyond the skills and competencies, we must build With interest rates starting to taper, inflation easing, a good culture, one that is conducive to growth and and the economy picking up steam, it is easy to take excellence. Beyond gaining product knowledge, we an optimistic view of 2019. However, concerns such must embolden them to render decisions and act with as the twin fiscal and trade deficits, the impact of the a sense of responsibility.