PH banks’ 9-mo profits up as margins hold firm
Philippine banks posted a nearly 4-percent profit growth in the first nine months, buoyed by resilient margins that expanded at a double-digit pace even as interest rates declined.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the local banking sector netted P300.4 billion from January to September, up by 3.6 percent year-on-year.
At the same time, total assets of Philippine banks expanded by 8 percent to P28.8 trillion during the period. Deposits, a major lifeline for lenders, stood at P21 trillion, marking a 7-percent growth from last year.
Lenders managed to grow profits even as the central bank embarked on a rate-cutting cycle that is now expected to go deeper than initially projected, part of efforts to shore up the economy against headwinds from a widening corruption probe and severe weather disruptions.
In October, the BSP surprised the market by cutting the policy rate that banks use as a guide when pricing loans by a quarter point to 4.75 percent. Governor Eli Remolona Jr. has since signaled the possibility of further easing, acknowledging mounting challenges that could slow growth.
Figures showed total operating income of banks during the nine-month period grew by 10 percent to P1 trillion. Meanwhile, noninterest expenses like compensation, taxes, fees and provisions also increased by 10 percent to P573.2 billion.
Notably, net interest income climbed by 11 percent to P851.5 billion.
Noninterest income grew by nearly 8 percent to P185 billion, as higher revenues from fees (+13 percent), sale of other assets (+8.9 percent) and other income streams (+52 percent) offset a 70-percent plunge in trading gains to just P5.6 billion amid heightened market volatility.
Retail loans
Alfred Benjamin Garcia, research head at AP Securities Inc., said banks may have chased higher-yielding retail loans to protect their margins from declining interest rates —a development that could put a spotlight on lenders’ asset quality.
“In general, the banks managed to underpin net interest margins by aggressively expanding their higher-yielding consumer loans segments. Overall margins were further boosted by higher fees and non-interest income,” Garcia said.
“For now, we are looking forward to better loan growth as interest rates continue to decline while we closely monitor credit quality to ensure that the banks are not taking on an unhealthy amount of risks just to boost margins,” he added.
Reinielle Matt Erece, an economist at Oikonomia Advisory & Research Inc., said the growth in banks’ net interest income may have been driven by volume of loans rather than yields.
“Lower inflation, lower interest rates have all increased the confidence of consumers and business to take out more loans,” Erece said. “This means more business for banks.”
