China Bank net profit up 21.9% to P5 B in 2010

MANILA, Philippines - The China Banking Corp. net earnings jumped 21.86 percent to P5 billion last year, from P4.103 billion in 2009.

The original 2010 income target was set at a conservative P4.4 billion. China Bank president and chief executive officer Peter S. Dee said in a statement that the strong performance last year was driven by revenues from continued loan growth and improved trading gains.

“Fee-based businesses such as bancassurance, private banking, cash management and remittances also contributed to the earnings growth,” Dee added.

Return on equity improved to 16.69 percent from 15.36 percent, while return on assets of 2.15 percent from 1.9 percent.

Dee said that this year, they would continue to expand their branch and automated teller machine network. China Bank presently operates a branch network of 269 and 440 ATMs nationwide, including its thrift banking arm, ChinaBank Savings.

The bank targets a combined branch network of 400 by the end of 2011. Meanwhile, total revenues as of end 2010 grew to P17.89 billion while total assets grew 10 percent to P257.47 billion.

Net interest income amounted to P8.63 billion as interest expense decreased by 11.5 percent due to lower borrowing rates. But fee-based income increased by 14 percent to P4.68 billion, boosted by higher trading gains, which grew 47.4 percent to P1.75 billion.

Gross loan portfolio expanded by 10.6 percent to P113.7 billion due to higher corporate borrowings, bringing the ratio of net loans to total assets to a 40.9 percent in 2010 from 40.4 percent the year before in 2009.

China Bank, a member of the SM Group of Companies, reduced its loan-loss provisions by 37.4 percent to P496 million. Nonetheless, loan-loss coverage ratio remains to be among the highest at 128.7 percent.

Low cost funding ballooned to P71.82 billion as checking and savings accounts (CASA) deposits continued to build up. Total deposits grew 10.2 percent to P213.04 billion. The share of CASA deposits to total peso deposits improved to 44.8 percent from 41.6 percent.

“China Bank’s financial position remains solid with total capital funds of P35.45 billion, up by P5.09 billion. This translates to a capital adequacy ratio of 16.26 percent, still one of the strongest in the industry,” the bank president said.

Operating expense grew slightly by 2.48 percent but the bank reflected a cost efficiency ratio of 53.5 percent from 56.3.

In May 2010, China Bank joined the 30-stock PSE index (PSEi). In the same year, Fitch Ratings affirmed the bank’s financial strength rating of “AA-”on the national credit rating scale, one of the highest such ratings in the country.