Earnings of Philippine banks up 9.3% to P60 billion in Q1

MANILA, Philippines — Earnings of Philippine banks increased by 9.3 percent to P59.66 billion in the first quarter  from P54.59 billion in the same quarter last year despite higher provisioning to prepare for the onslaught of bad loans due to the impact of the coronavirus disease 2019 or COVID-19 pandemic.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s provision for credit losses on loans and other financial assets jumped by 43 percent to P14.09 billion from January to March compared to P9.85 billion in the same period last year.

Likewise, bad debts written off by Philippine banks surged by 28.7 percent to P1.24 billion in the first quarter from P961.48 million a year ago amid the  outbreak.

President Duterte issued Proclamation 922 last March 8 declaring a state of public health emergency due to the first case of local transmission of the contagion in the country.

Data from the central bank showed the banking industry’s operating income increased by 22.5 percent to P225.87 billion in the first quarter from P184.32 billion in the same quarter last year.

The net interest income of banks operating in the country reached P175.07 billion,   24.4 percent higher from P140.73 billion. Interest income grew by 13.1 percent to P242.13 billion from P214.01 billion, while interest expense declined by 8.5 percent to P66.96 billion from P73.16 billion.

The non-interest income of Philippine banks rose by 16.5 percent to P50.81 billion from P43.59 billion on the back of higher earnings from fees and commissions as well as trading gains.

Fees and commission income went up by 12.6 percent to P27.15 billion from P24.12 billion, while trading income increased by 21.9 percent to P18.2 billion from P14.93 billion.

Profits of universal and commercial banks or big banks inched up   by 3.1 percent to P51.09 billion in the first quarter from P49.54 billion in the same quarter last year as provisions for credit losses on loans and other financial assets surged by 33 percent to P11.07 billion from P8.33 billion

Likewise, thrift banks or mid-sized banks booked a double-digit 10.4 percent rise in earnings to P3.94 billion from P3.57 billion.

Both Moody’s Investors Service and Fitch Ratings downgraded the outlook on Philippine banking sector to “negative” from “stable” as the lockdown to prevent further spread of COVID-19 has raised asset risks and increased pressure on profitability of major players.

However, BSP Governor Benjamin Diokno said the Philippine banking system is sound and resilient, allowing it to withstand the adverse effects and uncertainties brought about by the   pandemic.

Diokno said assets of Philippine banks increased by 8.8 percent to P18.1 trillion and their deposit base grew by 8.4 percent to P13.6 trillion as of end-February.

“Prudential reforms have been put in place to maintain sufficient buffers in times of crisis and ensure business continuity to serve financial consumers while keeping the economy going,” Diokno said.

Likewise, Diokno said banks maintained sufficient buffers to meet liquidity and funding requirements with a capital adequacy ratio of 16 percent and a common equity tier 1 ratio of 14.8 percent. The industry’s liquidity coverage ratio was at 169.9 percent, while the minimum liquidity ratios of thrift and rural banks were maintained at 30 percent, 54.1 percent, respectively.