MANILA, Philippines — Philippine National Bank (PNB) expects to emerge from the pandemic stronger after implementing major reforms and as the economy further reopens.
PNB president and chief executive officer Jose Arnulfo Veloso said the bank is focused on strengthening its liquidity position, taking advantage of favorable market conditions and addressing potential delinquencies that may arise from the impact of the prolonged pandemic.
“We remain confident that these strategies, along with our planned tactical moves will ensure that the bank will emerge from the crisis stronger in the long-run. We remain hopeful that the arrival of the COVID-19 vaccine will further open the economy, enabling these challenged industries to begin the road to recovery. This will allow us to claw back our provisions in the future,” he said.
The Lucio Tan-led bank reported a 17 percent rise in net profit before provisions for impairment and taxes to P17.6 billion last year, driven by the continued improvement on net interest income and robust trading gains amid the economic downturn due to the global health crisis.
PNB adopted a proactive approach in addressing potential delinquencies that may arise from the impact of the prolonged pandemic with provision for potential loan losses reaching P16.9 billion last year or more than five times the year-ago level.
“The economic fallout from the COVID-19 pandemic made it necessary for PNB to adopt a more prudent approach in asset deployment and recognize substantial credit provisioning which adversely impacted its bottom line in order to protect the balance sheet,” he said.
Veloso, who is also president of the Bankers Association of the Philippines (BAP), said PNB has allocated loan loss reserves for severely impacted essential industries such as real estate, transportation, wholesale and retail trade as an anticipatory measure to manage the bank’s risk exposures.
This resulted in a 73 percent plunge in the bank’s net income to P2.6 billion last year from P9.8 billion in 2019. Net interest income recorded a double-digit 11 percent rise to P35.8 billion in 2020 from P32.4 billion in 2019, supported by lower funding cost that cushioned the drop in yield rates of earning assets.
The bank’s interest income on loans and receivables slipped by six percent as its loan portfolio declined by 8.8 percent to P600 billion from P657.9 billion.
“This reflected the weak demand for loans owing to economic uncertainties as well as PNB’s strategy to focus on strengthening its liquidity position by investing most of the available funds in short-term and more liquid placements to remain resilient during the pandemic,” the bank said.
PNB recorded a more than three-fold increase in net trading securities gains to reach P3.3 billion in 2020 from a year ago as the bank took advantage of favorable market opportunities during most part of 2020. The gains more than compensated for the decrease in net service fees and commission income arising from the general decline in corporate banking transactions.
“As the pandemic inevitably reshaped how businesses are conducted and transformed customer behavior, we are focused on exploring new opportunities, particularly in the digital space, that will translate to new revenue streams for the bank, while at the same time mitigating the risks arising from operating in the new normal,” Veloso said.