China Bank profit jumps 24% in H1

MANILA, Philippines — China Banking Corp.’s earnings surged by 24 percent to P5.2 billion in the first half from P4.2 billion in the same period last year despite a sharp increase in bad loan provision in anticipation of higher defaults due to the COVID-19 pandemic.

William Whang, president of China Bank, said the first half results reflect the bank’s continued strength and resilience, and demonstrate the soundness of its strategies to thrive in the new normal.

“The year 2020 will go down in China Bank’s history, not just for our centennial anniversary, but for our resolve to make the best out of a very difficult situation, keeping in mind the safety and welfare of our stakeholders,” Whang said.

For the second quarter alone, the bank’s net income went up by 27 percent to P3 billion from P2.36 billion in the same quarter last year.

The country’s sixth largest bank recorded a strong growth in the first half despite allocating P4.8 billion for loan loss provisioning, more than 14 times last year’s amount, in anticipation of the impact the pandemic on asset quality.

“In these uncertain times, we remain cautiously optimistic. We are adapting our strategies accordingly and managing our capital with the prudence that the current volatility calls for.  I am convinced that we could overcome the difficulties, and like in the last 100 years, we would do so by standing by our customers, cooperating with regulators, and doing our part to fight this pandemic and emerge stronger together,” Whang said.

The bank said its total operating income surged by 40 percent year-on-year to P21 billion on the back of the 39 percent jump in net interest income to P16.2 billion amid higher volume of earning assets and lower funding costs as market interest rates declined.

Net interest margin improved to 3.8 percent from 3.2 percent.

Meanwhile, non-interest income jumped by 41 percent to P4.7 billion primarily from strong trading and securities gains, which soared 212 percent to P2.8 billion.

Operating expenses inched up by five percent to P10.4 billion mainly from COVID-19 and higher volume-related expenses, while cost-to-income ratio improved to 50 percent from 66 percent in the same period last year.

“Our balance sheet reflects ample liquidity and sufficient capitalization. We are closely monitoring developments and working with our customers who are under financial distress in these difficult times,” Whang said.

Patrick Cheng, chief finance officer of China Bank, said ‘’the bank is confident financial strength would enable the bank to navigate the new or even the next normal while the long-term impact of the global pandemic on the economy and banking industry remains uncertain.’’

The bank’s total assets grew by eight percent to P982 billion due primarily to loan growth. Its loan book expanded by 11 percent to P593 billion as the bank continued to provide credit across market segments.

Asset quality remained healthy amid the loans growth, with a non-performing loan (NPL) ratio of 1.6 percent and NPL cover at 146 percent.

On the funding side, total deposits inched up by three percent to P773 billion. Total capital stood at P98 billion, up eight percent year-on-year.