Banner year seen for ‘Big 3’ banks

The country’s three largest publicly listed banks are all set for a banner year, with the impact of lower interest rates expected to take effect only in 2026.

Alfred Benjamin Garcia, research head at AP Securities Inc., told the Inquirer on Thursday the “Big Three” banks—BDO Unibank Inc., Bank of the Philippine Islands (BPI) and Metropolitan Bank and Trust Co.—were seen to report record-high earnings in the first nine months of the year.

This will spill over to the fourth quarter, allowing them to beat their respective profit records in 2024.

“This is mainly because we are not yet seeing the full-blown effect of margin erosion from declining interest rates, and loans are still growing at a decent clip,” Garcia said in a text message, noting that tighter margins due to rate cuts are not expected until next year.

The Bangko Sentral ng Pilipinas is currently on a monetary policy easing cycle, so far slashing the benchmark rate for overnight borrowing four times this year to 4.75 percent.

Rate cuts typically result in tighter margins for banks, as net interest income from loans usually drops faster while the rates they pay for customer deposits decline slower. This may result in slower bottom line growth.

To combat this, Garcia said banks had been “actively trying to underpin earnings through aggressive expansion into higher-yielding consumer loans and by strengthening noninterest income.”

This comes after BPI netted a record P50.5 billion in the first nine months of the year, up by 5.2 percent as revenue growth offset the impact of higher expenses and provisions.

In a stock exchange filing on Thursday, the Ayala-led bank said its top line in the January to September period had climbed by 13.2 percent to P142.3 billion.

Net interest income likewise jumped 16.2 percent to P109.1 billion, signaling more demand for loans. Nonperforming loans ratio remained flat at 2.3 percent.

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As a result of its loan book expansion, BPI’s loan loss provisions surged by 145.83 percent to P11.8 billion.

Operating costs rose by 10.3 percent to P65.5 billion on rising business volume-related expenses, manpower and technology.

As of end-September, its assets had reached P3.5 trillion, up 9.3 percent.

BPI president TG Limcaoco earlier told reporters they were seeing double-digit growth in their loan portfolio this year, especially with consumer loans registering strong growth.