Fees emerge as revenue source as banks book lower profits

MANILA, Philippines — Three of the largest Philippine banks are seeing fees and commissions they charge customers for using their service as a potent revenue source during a pandemic that greatly exhausted their appetite to lend in the face of growing economic uncertainties.

Profits of Security Bank Corp. and Rizal Commercial Banking Corp. (RCBC) dropped year-on-year, while that of the Philippine National Bank (PNB) rose, separate disclosures at the stock exchange on Friday showed.

While their bottom-line may differ, each lender accumulated significant earnings from service fees and levies, which inevitably include bank transfer costs they charge clients when sending money through their digital platforms. These online and mobile apps instantly boomed last year after cash-loving Filipinos were forced to go cashless when stay-at-home orders were imposed.

Of the three reporting banks, only Tan-led PNB grew earnings by 34% year-on-year to P1.8 billion from January to March. The increase was dovetailed by a 35% surge in revenues from service fees and commissions.

In contrast, net income of Yuchengco-owned RCBC slid 30.4% from year-ago levels to P1.6 billion, but saw bank transaction fees surged 48% year-on-year in the first quarter. Security Bank also booked P1.6 billion in profits, although this was down 44% annually. Fees alone generated P1.1 billion in revenues.

To be fair, fees and charges in financial statements cover a wide range of payments made in availing bank services. These may include withdrawal and deposit fees, whichever is applicable, loan charges, stock brokerage fees, as well as penalties for falling below a maintenance balance of a deposit account. The breakdown is typically not listed in banks’ balance sheets and is not usually released by private lenders.

That said, a broader measure of digital money transfers is provided by the central bank, and under that, transaction volume in InstaPay platform surged 758% as of the third quarter of 2020, the latest period on which data is available, while that of PESONet increased 264%.

Banks did waive fees using these platforms until end last year, but had since slowly reinstated them in 2021. InstaPay allows the sending of small amounts up to P50,000 per transaction, while PESONet are for larger and bulk transfers.

In absolute amounts, what revenues generated from fees are much smaller than what they get from their other businesses such as extending loans. However, in the past months, banks have been reluctant to extend loans over fears they will not get paid by borrowers facing a record economic collapse and unprecedented joblessness. There is basis to this as two of the three banks’ non-performing loans climbed in first quarter.

PNB’s booked the highest gross NPL of 10.74% of total loans from 6.93% in end-2020. RCBC’s ratio stood at 3.1% from 2.9% in the same period. Only Security Bank’s soured loan ratio improved to 3.41% from 3.9%.

Meanwhile, PNB’s loans receivables shrank 6% year-on-year to P603.9 billion, while gross loans of Security Bank dipped 5% to P450 billion. Only RCBC hiked its loan portfolio by 7% year-on-year to P481.7 billion.

By the close of this week’s trading, shares in RCBC went down 0.57% at P17.5 apiece. PNB shares dropped by 24.39% to P21.55 each, while that of Security Bank inched up 0.17% to P115.30 each.