PHL banks’ net profit up 3.57% at end-Sept.

THE COMBINED income of Philippine banks climbed by 3.57% in the first nine months of the year as lenders booked higher interest and non-interest earnings during the period.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that banks’ net profit rose to P300.418 billion in the period from P290.056 billion a year ago.

Universal and commercial banks made up bulk of the total as they booked a P283.155-billion net income in the nine-month period, while thrift lenders posted net earnings of P15.897 billion.

Meanwhile, digital banks posted a combined net loss of P3.971 billion.

There was no available data on rural and cooperative banks’ income for the period.

The banking sector’s net interest income jumped by 11.01% to P851.472 billion at end-September from P767.039 billion a year earlier.

This came as interest income grew 8.46% year on year to P1.205 trillion from P1.111 trillion, outpacing the 2.51% uptick in interest expense to P351.599 billion from P342.975 billion.

Meanwhile, banks’ non-interest earnings went up 7.64% to P185.081 billion in the nine-month period from P171.943 billion last year.

This was mainly driven by the 12.41% increase in earnings from fees and commissions to P133.285 billion from P118.567 billion. Other income also surged 52.27% to P30.247 billion  from the P19.864 billion seen in the third quarter of 2024. This helped offset the 70.37% plunge in trading income to P5.589 billion from P18.86 billion, which was primarily due to a combined net loss from foreign exchange transactions.

On the other hand, banks’ non-interest expenses climbed by 9.91% to P573.234 billion in the first nine months from P521.539 billion in the same period last year.

This was driven by higher spending on compensation, taxes and licenses, fees and commissions, and other administrative expenses. Banks also saw higher amortization, impairment losses and provisioning during the period.

Philippine banks booked higher earnings in the period “largely due to sustained interest income and net interest margins amid continued low double-digit bank loans growth in recent months, and lower funding costs amid BSP and Federal Reserve rate cuts… that partly led to lower bond yields that added to trading gains,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

“Banks have been among the most profitable industries in the country in recent years, defying economic cycles,” he said.

However, he noted that the profit growth was slightly slower versus the Philippine economy’s 5% expansion during the same period.

Manageable asset quality and provisioning also supported bank’s profits, Mr. Ricafort added.

“Sustained growth in bank loans, especially consumer loans that have higher margins, would continue to support interest income, provided that asset quality is well managed to minimize credit-related losses,” he said. “Further BSP and Fed rate cuts amid benign inflation would lead to lower funding costs and higher trading gains going forward.”

The BSP has lowered benchmark borrowing costs by a total of 175 basis points (bps) since it began its rate cut cycle in August 2024, with the policy rate now at 4.75%. It is expected to continue easing its stance until next year to support a slowing economy, in line with the latest signals from BSP Governor Eli M. Remolona, Jr.

Meanwhile, the Fed has delivered 150 bps in reductions since September 2024, with its target rate currently at the 3.75-4% range. Fed Chair Jerome H. Powell has signaled a cautious stance moving forward as the US economic picture remains mixed.

BANKS’ ASSETS GROW
Meanwhile, separate BSP data showed that the Philippine banking sector’s combined assets expanded by 7.55% year on year to P28.755 trillion as of end-September from P26.737 trillion.

Month on month, this grew by 3.7% from the P27.729 trillion recorded at end-August.

Banks’ assets are mainly supported by deposits, loans, and investments. These include cash and due from banks as well as interbank loans receivable (IBL) and reverse repurchase (RRP) net of allowances for credit losses.

At end-September, universal and commercial banks continued to account for bulk of the industry’s assets with P26.903 trillion. This was followed by thrift banks with P1.324 trillion, and digital banks with P142.545 billion.

The central bank has not released data on rural and cooperative banks’ assets.

The data showed that the banking sector’s total net loan portfolio, inclusive of IBL and RRP, grew by 9.27% to P15.758 trillion at end-September from P14.421 trillion the previous year.

Banks’ total net investments, or financial assets and equity investments in subsidiaries, went up by 9.91% to P8.505 trillion from P7.738 trillion a year earlier.

Meanwhile, net real and other properties acquired amounted to P134.397 billion in the nine months to September, rising by 19.96% from the P112.037 billion in the same period in 2024.

Banks’ other assets likewise increased by 9.65% to P2.227 trillion at end-September from P2.031 trillion a year prior.

On the other hand, cash and due from banks stood at P2.131 trillion, down by 12.52% from the P2.436 trillion a year prior.

Central bank data also showed that the total liabilities of the banking system increased by 7.51% to P25.176 trillion in the nine-month period from P23.418 trillion the previous year.

Bulk of the sector’s liabilities were deposits, which grew by 7.49% year on year to P21.047 trillion at end-September from P19.581 trillion.

Broken down, peso-denominated deposits amounted to P17.389 trillion, while foreign currency deposits stood at P3.657 trillion. — Katherine K. Chan