Earnings of Philippine banks up 26% to P66 billion in Q1

MANILA, Philippines — The earnings of banks operating in the Philippines increased by 26.3 percent to P66.34 billion in the first quarter from P52.52 billion in the same quarter last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

The operating income of Philippine banks grew by 6.7 percent to P226.68 billion in end-March from P212.39 billion in end-March last year, as net interest income climbed by 6.1 percent to P171.22 billion from P161.39 billion.

Interest earnings of the sector inched up by 3.4 percent to P198.36 billion from P191.81 billion, while interest expense declined by 10.6 percent to P26.99 billion from P30.22 billion.

Likewise, the non-interest earnings of banks grew by 8.7 percent to P55.46 billion from P50.99 billion, fueled by the 8.7 percent increase in earnings from fees and commissions to P28.01 billion from P25.77 billion.

The industry also booked trading gains amounting to P4.39 billion in the first quarter of the year or 29.5 times the P148.93 million recorded in the same period last year, as realized gains from sale or redemption reached P3.31 billion and reversed the P1.35 billion losses.

The growth was enough to offset the 65 percent plunge in profit on the sale of other assets to P6.62 billion from P18.81 billion.

Major players in the banking sector managed to control the increase in non-interest expenses at 3.6 percent to P131.97 billion from January to March compared to P127.41 billion in the same period last year.

The industry’s provision for credit losses and other financial assets declined by 9.4 percent to P20.99 billion from P23.18 billion, while the amount of bad debts written off also plunged by 72.3 percent to P951.87 million from P3.43 billion.

Last year, the net income of Philippine banks surged by 44.8 percent to P224.75 billion from P155.22 billion in 2020 on the back of the sharp drop in provisioning for bad debts, as the country continues to recover from the impact of the pandemic.

The Philippines emerged from the pandemic-induced recession with a gross domestic product (GDP) growth of 5.7 percent last year after shrinking by 9.6 percent in 2020 as the economy stalled due to strict COVID lockdowns.

The recovery was sustained with a faster-than-anticipated 8.3 percent in the first quarter as the economy continued to reopen with the easing of quarantine and lockdown protocols.

Despite the increase, the industry profit has yet to fully recover from the global health crisis that translated to a 32.7 percent slump in earnings in 2020 from an all-time high of P230.67 billion in 2019.

The Cabinet-level Development Budget Coordination Committee (DBCC) sees the GDP expansion accelerating to seven to nine percent this year as the economy continues to reopen further amid the faster rollout of COVID vaccines.

BSP Governor Benjamin Diokno said the Philippine banking system remained sound amid the global health crisis, as banks remained profitable and well capitalized based on stress testing undertaken by the regulator.

“Our latest results indicated that banks’ capital remain adequate to absorb credit and market losses. In addition, a more frequent stress test analysis is carried out on the bank’s exposures to the real estate sector,” Diokno said.

According to Diokno, the latest result of the stress test conducted last September showed the banking system’s ability to withstand shocks that may arise from the property market  under an assumed 25 percent write off of commercial estate loans and real estate investments.

The BSP chief also said that the liquidity ratios of Philippine banks remain well above the regulatory minimum, indicating the banks’ ability to meet short and medium term funding requirements.