EastWest announces IT, digital banking investments

Gotianun-led East West Banking Corp. (EastWest) will invest more than P2 billion in boosting its information technology (IT) and cybersecurity units as they engage in the next generation digital banking business, according to a report by Manila Bulletin.

The bank’s CEO, Jerry G. Ngo, said last year, they alloted 10 percent of its total expenses to IT and digitalization. In 2023, EastWest spent P20.3 billion as operating expenses.

Ngo said they will be increasing their budget for IT, cybersecurity and digital banking in the next years.

“We continue to invest in technology so hopefully we will see the results (going forward). We continue to invest heavily on digital banking,” he said in a press briefing Friday, April 19, after its virtual annual stockholders meeting.

Ngo said the bank is poised to serve its clients and future depositors as the “next generation” in digital banking by launching several new products in the next few months and in investing more to improve digital capabilities.

The bank will soon launch Easy Way by May at the earliest, and Easy Biz later in 2024.

Ngo said the multi-year investments in IT and digitalization has focused on the two products, Easy Way and Easy Biz.

EastWest has allotted “a few billion over a 3-5 year period, just like what big banks in the region are doing,” he said.

He added that last year, with 10 percent of their total expense going to IT and especially in cybersecurity, the bank has a significant budget for these two units and should result to costs coming down, eventually.

Meanwhile, Ngo is confident EastWest can compete in the digital banking space because they have the advantage of being a traditional bank leveraging on digital technologies to cross-sell and attract new clients that they now know better because of their enhanced IT systems.

In investing more heavily in IT and cybersecurity, the bank’s CEO said, “there’s a lot more that we can do but we’re getting there” in terms of strengthening cybersecurity.

With their set ways and standing as a traditional bank, Ngo said there is no need to apply for a digital bank license when the central bank reopens the application window this year or in 2025. At the moment, there are only six financial institutions with digital bank license.

“Traditional bank license gives you more flexibility and capability than a digital bank. To my mind, the only thing you get as a digital bank is that you can raise money from investors,” said Ngo. As such, all they have to do is “to be faster as a traditional bank” and to “focus on banking as we know it which is the provision of credit and loans.”

“What I’ve seen in the region is that traditional banks who are adept, agile and are able to understand technology are turning out to be the winners. And the reason for that is simple, they know the basics of banking better, they are able to understand what risks are all about, they are able to access lower costs of funding,” he said.

Once a bank has low cost funding, ability to handle risks, and no restrictions unlike in digital banks, then there is no need to apply for a specific license to run a digital bank.

Ngo said the crucial factor as a bank is the ability to lend which is “only as good as your ability to collect.” It is a known fact – even recognized by the central bank – that digital banks can grow deposits as much as they can, but they have difficulty in terms of loans and collection.

Ngo added that the combination of physical banking and digital will make any bank – including EastWest – “a winner.” He has implied as such that they have no intention of applying for a digital bank license once it is available again.

EastWest reported a net income of P6.1 billion in 2023, up by 32 percent year-on-year. Profits increased because of consumer lending and deposit growth.

For this year, Ngo said that despite entering a positive momentum for 2024, “we acknowledge that there are really some challenges ahead (and) I think the interest rate environment will be persistently high and it’s going to affect the rest of the industry. “

For this year, Ngo said he is hoping that they can continue to keep the pace of 2023. He added that he is focused on profitability but the high interest rate environment is very challenging. Still, another double-digit net income in 2024 is not impossible.

“My own personal performance metrics is driven on that. We’re going to go for it again, and again, and again (double-digit growth). What we’re going to do is to build a strong foundation to be able to allow us to do that. That’s where the loan origination system, world flow management (comes in),” said Ngo.

To bankroll its expansion, the bank intends to raise as much as P30 billion this year as funding. The bond issuance will be staggered and will depend on the interest rate scenario and availability of liquidity.

As for consumer loans, Ngo expects this to grow substantially, boosted by the growth in credit cards and personal loans.

“We are at the moment testing our automated credit decisioning engine and straight-through loan originating system. It’s in the final stages of tests right now to be able to allow not just digital but instantaneous process,” he said.

At the moment, EastWest has 383,000 clients that are in the digital space, predominantly driven by banking but also more from Komo, it’s version of a digital bank, said Ngo.

“I don’t see digital as a totally separate business. I see it as an enabler to our existing business. As a way for us to do more cross-selling … its easier to distribute via the digital channels,” he added.

Ngo describes EastWest as “not purely digital but digital.”

“We have three nice assets. We have Komo which is our digital bank in a way. We want to position Komo as available to all the banks and we’re targeting that middle of the year. You can then either use Komo as the main way to connect with EastWest or you can use it as an e-wallet,” he said.

With Easy Way and Easy Biz, the bank’s digital banking becomes more complete.

“Banking is with Easy Way, e-wallet is with Komo. Esta is our chatbot. We have the apps for structure but it’s also casual and then formal. The unstructured element is coming in from Esta. We believe that when we put it all together, you have the best breed … (and) the flexibility in dealing with clients,” said the bank's CEO.

Gotianun-led East West Banking Corp. (EastWest) will invest more than P2 billion in boosting its information technology (IT) and cybersecurity units as they engage in the next generation digital banking business.

The bank’s CEO, Jerry G. Ngo, said last year, they alloted 10 percent of its total expenses to IT and digitalization. In 2023, EastWest spent P20.3 billion as operating expenses.

Ngo said they will be increasing their budget for IT, cybersecurity and digital banking in the next years.