Big banks boost profits to P61.9 B in H1

MANILA, Philippines - Profits of major Philippine banks rose 6.3 percent in the first half of the year on the back of higher interest and non-interest earnings, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data from the central bank showed earnings of universal and commercial banks reached P61.91 billion from January to June this year,  P3.67 billion higher compared to P58.24 billion in the same period last year.

The interest income of major banks in the country amounted to P176.57 billion in the first six months of the year, 8.6 percent higher compared to P162.64 billion in the same period last year.

On the other hand, interest expense grew at a faster rate of 18.77 percent to P40.24 billion from P33.88 billion, translating to a six percent rise in net interest income to P136.27 billion from P128.59 billion.

Non-interest income grew 11.8 percent to P63.3 billion from P56.59 billion due to higher dividend, fees and commissions income; higher profits from foreign exchange operations; and higher gains on financial assets and liabilities held for trading.

The BSP said the return on equity of major banks improved to 10.70 percent in end-June this year from 9.83 percent in end-June last year, while return on assets increased to 1.3 percent from 1.2 percent.

Assets of major banks reached P10.06 trillion as of end-June this year from P9.25 billion in end June last year.

Earlier, Standard and Poor’s (S&P) said the windfall profits for Philippine banks are over amid the expected deterioration of assets quality of banks in Southeast Asia over the next 12 to 18 months.

S&P credit analyst Ivan Tan said earnings of Philippine banks fell in 2014 due to an industry-wide slump in one-off gains from their trading activities.

“The banking system posted its first decline in net profits in five years in 2014 as the hefty gains from selling government bonds to institutional investors decreased substantially,” Tan said.

The report pointed out Philippine banks’ return on average assets dropped to 1.27 percent in 2014 from a peak of 1.61 percent in 2013.

The analyst said profitability among banks shifted toward trading gains in 2013 on improved market conditions, positive investor sentiment, and an upgrade of the Philippine government to investment-grade status.

“We believe the days of windfall profits for Philippine banks are over and that trading gains will remain muted this year and into 2016,” he said.

According to the analyst, rising interest rates would continue to cut local bank’s gains from fixed-income investments, which account for over a quarter of their total assets.