Bank earnings up 28% to P52 B in H1

MANILA, Philippines – Earnings of banks operating in the Philippines surged 28 percent to P51.9 billion from January to June this year from P40.6 billion in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

“The Philippine banking system stayed in its growth trajectory for the first half of 2011. Banks remain profitable on the back of cost-efficient operations,” the BSP said.

Earnings of Philippine banks went up by 31.4 percent to P91.2 billion in 2010 from P69.4 billion in 2009 amid the economic growth concerns in advanced economies led by the US as well as the sovereign debt concerns in Europe.

The operating income of local banks went up by 9.52 percent to P176 billion in the first half of the year from a year-ago level of P160.7 percent due to the 7.02 percent rise in interest income and the 14.5 percent improvement in non-interest earnings.

On the other hand, the industry’s non-interest expenses rose 8.2 percent to P112.6 billion during the six-month period compared to last year’s P104.1 billion.

The BSP also reported that total resources of the banking industry climbed 11.5 percent to P7.018 trillion in the first half of the year from P6.295 trillion in the same period last year.

Data showed that the industry’s total resources remained principally funded by deposit liabilities with 73.5 percent and owner’s capital of around 12 percent.

Likewise, the BSP said core lending of banks posted a double-digit growth of 17.1 percent to P3.043 trillion in the first semester of the year from P2.599 trillion billion a year ago. The growth was almost twice the recorded expansion of 8.5 percent a year ago.

Furthermore, the report showed improving loan and asset quality as key ratios were back on their pre-crisis levels with banks’ non-performing loan (NPL) ratio further easing to 3.1 percent from year ago’s 3.9 percent while non-performing asset (NPA) ratio similarly improved to 3.6 percent from 4.4 percent a year ago.

The central bank also reported a growing deposit base as deposit liabilities increased by 8.5 percent to P5.155 trillion this year from P4.754 trillion a year ago due to continued confidence in the banking system.

The BSP also said banks enhanced their solvency as capital adequacy ratio (CAR) remained above BSP threshold of 10 percent and Basel standard of eight percent as the industry posted a CAR of 17.4 percent on a consolidated basis and 16.5 percent on a solo basis as of end-March this year.

The report stated that key performance indicators for the first half of 2011 showed the sustained strength of banks’ core balance sheet accounts: steady asset expansion, double-digit credit growth, stable funding base, ample liquidity, continuing improvement in overall asset quality and above standard solvency ratios and healthy bottom lines.

“The seeds of earlier reforms nurtured by the currently improving macroeconomic environment and global investor sentiment to the Philippine sovereign continue to bear fruit as the Philippine financial system sustained its growth spurt for the first semester of 2011 amidst global economic slowdown,” the BSP stressed.

The BSP said it has been upgrading the banking system’s compliance with international standards and best practices following the early adoption of the Basel III conditions for non-common equity capital instruments in order to maintain market confidence, enhance transparency in financial transactions, and mitigate systemic liquidity risks.

It is also promoting financial stability through periodic stress tests, industry consolidation and closure of weak financial institutions.

Another area that merits careful consideration, it added, is keeping the delivery of banking services fully attuned to the needs and demands of the market.

In response to recent market dynamics, the BSP has implemented the two-phased liberalization of bank branching in eight restricted areas of Metro Manila to promote further competition in the delivery of banking services. –Lawrence Agcaoili (The Philippine Star)