CHINA BANKING Corp. saw its net profit surge by 61% to P3.6 billion in the first quarter, buoyed by the strong growth in its core business, the bank told the stock exchange on Thursday.

China Bank said its net income grew from the P2.2 billion profit it booked in the same period of 2020 on the back of strong net interest revenues and buffers and as it kept its expenses minimal.

Its net profit in the first quarter translated to a return on equity of 13.4%, up from 9.2% last year, and a return on assets of 1.4%, also higher than 2020’s 0.9%.

“Amid the economic downturn due to the pandemic, China Bank continued to post strong growth in its core businesses, to provide higher pandemic-related buffers, to absorb the one-time impact of the CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) law on deferred tax assets, and to keep the growth of operating expenses moderate despite adjusting priorities for pandemic-related expenses,” it said in a statement.

The bank’s net interest income grew by 16% to P9.2 billion in the first quarter from P7.9 billion in the same period the year prior, mainly because of the 52% drop in interest expense. It posted a net interest margin of 4.2%, higher than the year-ago level of 3.8%.

Its income from fees and other charges tripled to P3.6 billion in the first three months of 2021 from P1.2 billion a year ago on the back of strong gains from trading and securities.

Meanwhile, China Bank posted P12.7 billion in net revenues last quarter, up 40% from P9.1 billion in the first three months of 2020.

Operating expenses rose 6% to P6.2 billion. Its cost-to-income ratio was at 49%, down from 64% in the same quarter last year.

China Bank said its gross loan portfolio shrank by 3% to P572 billion from P592 billion a year ago due to weak demand for credit.

Despite the drop in credit, its nonperforming loan (NPL) ratio went up to 3.8% at end-March from 1.7% the year before. It continued to ramp up its loan loss provisions to P2.2 billion from P412 million last year. Consolidated NPL coverage was at 86%, with a corresponding NPL coverage ratio of 100% for the parent bank.

On the funding side, China Bank saw its total deposits inch up by 4% to P817 billion in the first quarter, with its current and savings account (CASA) deposits jumping 23% year on year to P505 billion, resulting in a higher CASA ratio of 62% from 52% last year.  Time deposits, however, went down 17% to P311 billion.

China Bank said its total equity rose by 12% from a year ago to P109 billion, with its common equity Tier 1 ratio at 14.53% in the first quarter, up from 12.14% a year ago, while its capital adequacy ratio rose 15.43% from 13.02%.

Its assets stood at P1.003 trillion as of March, growing by 2% from the P984 billion recorded at end-March 2020.

“We will further strengthen our liquidity position, maintain adequate capital, and enhance credit risk management while working with our customers who are severely impacted by the pandemic,” China Bank Chief Finance Officer Patrick D. Cheng was quoted as saying.

Shares in China Bank went up by 1.69% or 40 centavos to close at P24 apiece on Thursday. — B.M. Laforga

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