Philippines banks book record profit in 2022

MANILA, Philippines — Philippine banks bolstered their earnings by 37.5 percent to hit an all-time high of P309 billion last year, from P224.75 billion a year earlier, on the back of higher interest income amid the aggressive rate hikes by the Bangko Sentral ng Pilipinas (BSP) and higher trading gains.

This erased the previous record high of P230.67 billion recorded in 2019.

Data from the central bank showed the operating income of Philippine banks increased by 15.5 percent to P1 trillion in 2022 from P869.42 billion in 2021.

Banks’ net interest income went up by 12.8 percent to P746.46 billion from P661.84 billion as interest earnings rose by 16 percent to P901.84 billion from P777.23 billion, while interest expenses jumped by 34.6 percent to P154.89 billion from P115.07 billion.

The central bank raised its key policy rates by 350 basis points, bringing  the benchmark interest rate to a 14-year high of 5.50 percent from an all-time low of two percent to tame inflation and stabilize the peso.

Likewise, the banking sector’s non-interest earnings went up by 24.1 percent to P257.55 billion from P207.59 billion as trading gains surged by 70.4 percent to P16.48 billion from P9.67 billion, while fees and commission income booked a double-digit growth of 13.6 percent to P121.85 billion from P107.25 billion.

The non-interest expenses of banks rose by 8.2 percent to P554.22 billion from P512.37 billion.

According to the BSP, the industry’s provision for credit losses on loans and other financial assets slipped by 1.8 percent to P104.44 billion last year from P106.39 billion in 2021 as the economy continued to reopen from strict COVID-19 quarantine and lockdown protocols.

On the other hand, soured loans written off by Philippine banks fell by 66.4 percent to P2.35 billion in 2022 from P7.54 billion in 2021.

The Philippines managed to sustain its momentum with  gross domestic product  growing by 7.6 percent, slightly above the government’s target range of 6.5 to 7.5 percent.

Ivan Tan, director for institutional ratings at S&P Global Ratings, said during an online briefing that the profitability of banks would continue to improve despite the expected slowdown in credit growth due to the series of rate hikes by the BSP Monetary Board.

“We think the twin factors of a rising interest rate environment and persistently high inflation might cross out a lot of growth that we will see,” Tan said.