BPI Q2 profit up 29% year-on-year
BPI [BPI 87.50 3.80%] posted a Q2/21 profit of P6.8 billion, up 29% from Q2/20 profit of P5.3 billion, and up 36% from Q1/21 profit of P5.0 billion.
The Ayala Family’s bank has not provided full financials yet (this was only the press release “teaser”), so I’m only able to provide the highlights that BPI has elected to release. BPI attributes the stronger performance to “lower provisions recognized”. That refers to the funds that the banks have been setting aside for the losses related to the non-performing loans, and BPI is saying here that the actual amount that it lost on those loans was lower than it anticipated or projected when it initially set the funds aside.
BPI reported several other operational metrics for the first half of 2021 that were not as glowing: total revenues down 6.7%, net interest income down 6.6%, and non-interest income down 7.7%. Interestingly, BPI reported that its income from fees and commissions was up 37.2% “across all fee-based businesses”.
MB BOTTOM-LINE
The headline here, the “TL;DR”, is this: BPI lost way less money than it thought it would. That’s the bright spot.
Operationally, the bank is still not performing up to pre-COVID standards. The bank made less interest income from loans than last year, it made less money from trading than last year, while spending more on expenses and shrinking its overall book of loans. I’m not trying to say that the bank is in trouble, or even that it’s performing poorly, instead I’m just trying to provide a little context as to why the amazing headline numbers here don’t translate directly here to the underlying health and growth of the banking business itself.
There are still significant headwinds. Even BPI acknowledges that it is having trouble with its lending volume due to “softer demand in corporate, SME, and auto loans”. And we aren’t even factoring in what might happen to the economy if the Delta variant proves to be difficult for our already strained system to handle. We are about to see a raft of Q2 earnings reports that look good on paper due to the tax breaks provided by COVID relief legislation.
Some companies will be experiencing a legitimate business recovery, while for others, like BPI, the “recovery” might be less about growth and more about other balance sheet benefits that don’t speak directly to operations. That’s going to be the challenge going forward, especially if we start to see regions tip back into another round of confusing, patchwork lockdowns.
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