By Lee C. Chipongian
Net profits of the country’s big banks grew a significant 24.57 percent to P49.54 billion in the first quarter this year against P39.76 billion in the same period last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The growth was buoyed by commercial banks’ net interest income which rose by 22.06 percent in the first three months to P119.67 billion from P98.03 billion while its non interest income went up by 7.26 percent to P38.68 billion from P36 billion end-March 2018.
Overall, including small banks and non-banks, the domestic banking system reported combined net profits of P57.06 billion in the first quarter, 28.47 percent higher year-on-year or from P44.41 billion.
Total net interest income increased by 32.28 percent to P156.59 billion from P118.38 billion while non interest income was up by 20.16 percent to P48.83 billion from P40.64 billion.
Based on the BSP’s second semester 2018 “Report on the Philippine Financial System” released last Friday, it said that that banking system “at its core” continued to be “resilient amid evolving domestic and global environment.”
“Positive performance was evident across banking groups which posted sustained growth in assets, loans, deposits and capital. The universal and commercial bank industry primarily financed the growth of the major economic sectors such as real estate, wholesale and retail trade and manufacturing,” said the BSP.
The report also noted that the thrift bank, rural and cooperative bank industries supported the retail lending segment, particularly in providing loans to consumers, the micro, small and medium enterprises and the agri-agra sector.
“The financial soundness indicators affirm that the banking system is stable and resilient despite global uncertainties,” said the BSP.
Banks’ capital, it said, mainly common equity and retained earnings, has remained well-above domestic and global benchmarks.
It added that “credit quality was satisfactory notwithstanding double-digit loan growth; profits generated primarily from core income were at record high; and the banks’ high quality liquid assets were sufficient to absorb shocks while adequately providing the financing needs of the growing economy.”
In the report, the BSP said the sound and stable banking system is a product of not just “prudent regulation and risk-based supervision” but from banks’ cooperation with the BSP.
In the meantime, the BSP said financial market volatilities have limited banks’ profit opportunities in their trading portfolio in 2018, but that the banking system “still managed to eke out trading gains to contribute to the overall profitability.”
The trust industry and some non-bank financial institutions accumulated some losses in their trading portfolio, but managed to contribute to the overall financial system profitability, said the BSP.
“Banks’ sensitivity to interest rate risk was mitigated by rebalancing their investment portfolio from the trading books to the banking books, thus limiting market-to- market losses,” added the BSP. “Likewise, banks’ foreign exchange exposures were relatively secured from fluctuations in the currency markets.
This is prompted by their foreign exchange positions that are structured to meet client demands and subject to prudential limits.”