Earnings of Philippine banks up 26% in H1

MANILA, Philippines — Profits of Philippine banks surged 26.4 percent in the first half of the year to P109.77 billion from P86.87 billion due to higher interest and non-interest earnings, according to preliminary data from the Bangko Sentral ng Pilipinas.

The BSP said the operating income of banks recorded a double-digit 12.2 percent increase from P323.83 billion to P363.32 billion, as net interest income jumped 31.7 percent from P326.06 billion to P429.55 billion.

On the other hand, non-interest income of banks operating in the country increased by 9.2 percent from P80.08 billion to P88.22 billion due to huge gains from higher earnings from trading, as well as from fees and commissions.

The industry’s earnings from fees and commission went up by 10.9 percent from P43.23 billion to P47.95 billion, while trading income surged 49.7 percent from P27.82 billion to P31.71 billion.

Philippine banks booked gains amounting to P7.87 billion from the sale or redemption of securities, more than double the P3.75 billion gains recorded last year.

On the other hand, unrealized losses from marking to market of securities reached P502.93 million in the first half of the year, reversing the gains that reached P12.34 billion in the same period last year.

Likewise, gains from foreign exchange transactions amounted to P4.87 billion from only P91.93 million, while foreign exchange profit fell by 28.2 percent from P2.94 billion to P2.11 billion.

The BSP has allowed the moderate and gradual weakening of the peso against the US dollar due to the strong demand for the greenback to finance the country’s expanding economy.

Non-interest expenses of big banks increased eight percent from P209.51 billion to P226.29 billion.

Earnings of universal and commercial banks or big banks to P100.61 billion in the first half of the year or 30 percent higher than the P77.36 billion recorded in the same period last year.

Interest income of big banks jumped 37.4 percent from P272.13 billion to P374.02 billion, while non-interest income booked a double-digit increase of 12.3 percent from P71.13 billion to P79.88 billion.

On the other hand, profits of thrift or mid-sized banks fell from P8.03 billion to P7.67 billion due to higher interest expenses and higher provision for losses on accrued interest income from financial assets.

The industry is dominated by BDO of the family of the retail and banking magnate Henry Sy, Metrobank Group founded by the late taipan George Sk Ty, Ayala-led Bank of the Philippine

Islands, Philippine National Bank of tobacco and airline magnate Lucio Tan with, Security Bank of the Dy family and MUFG of Japan, Sy-led China Bank, Aboitiz-owned Union Bank, and Yuchengco-led Rizal Commercial Banking Corp.

The BSP has cautioned banks and financial institutions on interest rate risks on their earnings with the issuance of the guidelines for managing interest rate risk in the banking book.

BSP Governor Benjamin Diokno said the regulator recognizes that changes in the structure of banks’ and quasi bank’s balance sheets and movements in interest rates pose risks to earnings and economic value.

Diokno warned excessive interest rate risk in the banking book (IRRBB) may result in a reduction in earnings or of capital. IRRBB refers to the current or prospective risk to capital and earnings arising from adverse movements in interest rates that affect banking book positions.

“In this regard, the BSP expects banks and quasi banks to implement a comprehensive approach to risk management that ensures timely and effective identification, measurement, monitoring and control of IRRBB,” Diokno said.