PNB bullish on continued growth

“Our mission is to diversify our loan portfolio to the point that we are increasing our exposure to small and medium enterprises and also consumer loans.”

MANILA, Philippines — The Philippine National Bank (PNB) is confident that the country’s banking industry will maintain its upward trajectory this year and into the next, mainly driven by higher demand for loans as interest rates decline.

At the sidelines of the PNB-Philippine Airlines (PAL) Mabuhay Miles World Elite Mastercard launch, PNB president and CEO Florido Casuela said there have been positive trends observed in recent months.

“If you gather information from the central bank, the July figures have been going up — loans, deposits. So, the way I look at it, it’s still growing,” Casuela said, expressing optimism for the current year.

“For next year, it will be much better than this year,” he said.

Based on data from the Bangko Sentral ng Pilipinas (BSP), the earnings of Philippine banks increased by 4.1 percent to P190.21 billion in the first half from P182.76 billion in the same period last year.

The sector’s net interest income increased by 15.5 percent to P505.8 billion from P437.8 billion as interest earnings went up by 20 percent to P729.1 billion from P607.7 billion, while interest expenses climbed by 31.2 percent to P222.7 billion from P169.7 billion.

Lending growth also picked up to 10.4 percent in July from 10.1 percent in June, its highest level in 19 months or since 13.7 percent in December 2022 despite the elevated high interest rate environment.

Loans disbursed by universal and commercial banks amounted to P12.14 trillion in end-July, P1.14 trillion higher than the P11 trillion recorded in the same period last year.

According to Casuela, the monetary easing cycle of the BSP will be a major factor in driving loan growth for the next two years.

“The reduction of interest rates is a big factor in terms of us giving more loans. It makes it more affordable for those availing consumer loans —credit card, housing loans and auto loans, in particular,” he said.

Asked for his outlook on the BSP’s upcoming policy decisions, the PNB chief said he is looking at a 25-basis-point rate cut in October and possibly another cut of the same size in December.

“Just based on what was observed by our economist and some pronouncements from the BSP governor, and with the straightening of the peso, (I think) interest rates will go down,” he said.

He emphasized that a reduction in interest rates would benefit the economy, as it would encourage more lending and consumer spending, further stimulating economic activity.

The banking sector is also anticipating reductions in reserve requirement ratios (RRR) this year, he said.

“The other positive side for the banks would be the possible reductions in reserve requirements. It’s quite at a significant mark,” he said, adding that lower RRR will make more funds available for lending or for investment.

On Friday, the BSP surprised markets by slashing the amount of deposit banks are required to keep in their vault, effective Oct. 25.

The regulator slashed the RRR for universal and commercial banks as well as non-bank financial institutions with quasi-banking functions by 250 basis points, to seven percent from the current level of 9.5 percent.

The RRR for digital banks was likewise lowered by 200 basis points to four percent from six percent, while the level of deposits mid-sized or thrift banks are required to keep with the BSP was cut by 100 basis points to one percent from two percent.

Meanwhile, the RRR of rural and cooperative banks went down by 100 basis points to zero percent from one percent. This means that small lenders are no longer required to keep a level of their deposits with the BSP.

Bullish for pnb

Casuela also said that he is optimistic about PNB’s growth prospects as the bank plans to diversify its loan portfolio, seeking to expand its reach across different sectors.

“We are very optimistic for the industry and for PNB. In fact, we are very confident about our performance for next year,” he said.

He said that PNB’s loan portfolio is currently dominated by corporate accounts as about 60 to 70 percent of the bank’s loan portfolio is made up of corporate loans at present.

“Our mission is to diversify our loan portfolio to the point that we are increasing our exposure to small and medium enterprises and also consumer loans,” he said.

“Right now, we have the lowest exposure to consumer loans among banks. So, we are increasing that as a percentage of the total loan portfolio. When you increase this, the percentage of corporate loans will be reduced.”

To boost consumer lending, PNB launched its PNB-PAL Mabuhay Miles World Elite Mastercard on Wednesday. The credit card offers exceptional travel privileges with its competitive low point-to-mile conversion.

Cardholders are rewarded with generous Mabuhay Miles bonuses, including 10,000 miles upon activation and 30,000 free Mabuhay Miles upon reaching P150,000 spent at PAL within the first three months of card issuance.

The PNB-PAL Mabuhay Miles World Elite Mastercard is a by-invitation-only card, exclusively offered for those with strong relationships with the bank.

However, the banking industry should still be cautious especially as non-performing loans may continue to rise, Casuela said.

The share of soured loans to the banking sector’s total loan book increased to 3.58 percent as of July from the revised 3.51 percent in June. It marked the fastest pace in 25 months or since the 3.60 percent in June 2022.

Soured loans went up by 15.5 percent to P508.12 billion in July from P440.07 billion in the same period last year.

PNB was recently named as the Most Admired Financial Services Provider in the Philippines by the International Business Magazine Awards (IBMA) 2024.

“PNB is truly honored for being consistently acknowledged for our sincerity and commitment in providing only the best customer experience here and abroad,” Casuela said.

“We will continue to strive for growth and deliver results, with Filipinos all over the world as our utmost priority,” he added.

The IBMA gives the most coveted awards to the most outstanding nominations across various industries with a pool of subject matter experts and strong research analyst wing that carefully inspect, verify and scrutinize all nominations.

This is the second time the IBMA has recognized PNB. In 2023, the bank was declared by IBMA as Best Bank for Corporate Social Responsibility.

Forbes has also recognized PNB as the Best Bank in the Philippines. The bank’s mobile banking app, PNB Digital, also received an award during The Digital CX Awards 2024 for Excellence in Customer Service Innovation, while Euromoney Private Banking Awards 2024 announced PNB as the Best Bank for Investment Research in the Philippines.