Big banks’ earnings up 1%

MANILA, Philippines – Earnings of major banks in the Philippines barely moved, inching up about one percent in the first nine months amid intense competition in the industry.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed profits of universal and commercial banks reached P87.34 billion from January to September, P794 million higher compared to P86.54 billion in the same period last year.

The interest income of major banks in the country amounted to P269.99 billion in the first nine months, 9.8 percent higher compared to P245.83 billion in the same period last year.

On the other hand, interest expense jumped 18.56 percent to P61.3 billion from P51.7 billion, translating to a 7.5 percent rise in net interest income to P208.58 billion from P193.92 billion.

Non-interest income slipped 1.1 percent to P86.28 billion from P87.25 billion due to lower other income.

Data showed non-interest expense of universal and commercial banks went up 6.6 percent to P186.64 billion in the first nine months from P175.12 billion in the same period last year.

The BSP reported return on equity of major banks improved to 10.09 percent in end-September from 9.89 percent in end September last year, while return on assets increased to 1.24 percent from 1.19 percent.

Assets of major banks reached P10.39 trillion as of end September, 10.7 percent higher compared to P9.38 billion in end September last year.

Earlier, Standard and Poor’s (S&P) believes 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 said 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 that the days of windfall profits for Philippine banks are over and that trading gains will remain muted this year and into 2016,” he said.