Independent Auditors' Report

The Stockholders and the Board of Directors
EastWest Banking Corporation

We have audited the accompanying financial statements of EastWest Banking Corporation (the Bank), which comprise the statements of condition as at December 31, 2007 and 2006, and the statements of income, statements of changes in equity and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

As discussed in Note 11 and to the financial statements, in 2007, the Bank recognized the additional provisions for impairment and credit losses amounting to P369.12 million, net of deferred tax assets of P198.76 million, as direct reduction to surplus as of January 1, 2007. As discussed in Notes 14 and 19 to the financial statements, in 2006, the Bank recognized the provision for tax contingency amounting to P71.18 million, net of deferred tax asset of P38.32 million, and derecognized deferred tax assets amounting to P129.72 million, as direct reduction to surplus as of January 1, 2006. Philippine Financial Reporting Standards require that the provision for impairment and credit losses, tax contingency and derecognition of deferred tax assets be charged to current operations in the period such are recognized. Had the provisions for impairement and credit losses, tax contingency and derecognition of deferred tax assets been recognized in the current operations, net income of P137.28 million and P127.28 million in 2007 and 2006, would have been a net loss of P231.83 million and P73.62 million, respectively.

In our opinion, except for the effects of the matters discussed in the preceding paragraph, the financial statements present fairly, in all material respects, the financial position of EastWest Banking Corporation as of December 31, 2007 and 2006, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Ramon D. Dizon
Partner
CPA Certificate No. 46047
SEC Accreditation No. 0077-AR-1
Tax Identification No. 102-085-577
PTR No. 0017592, January 3, 2008, Makati City
March 27, 2008

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