CHINA BANKING CORP. (China Bank) saw its net income climb 39% in the first half on the back of the strong performance of its core businesses.

The bank booked a net profit of P7.3 billion in the first semester, climbing from the P5.2 billion posted in the same period last year, it said in a disclosure to the local bourse on Thursday.

This translated to a return on assets of 1.4%, up from 1.1% last year, while return on equity also rose to 13.4% from 10.6%.

Net interest income rose 14% to P18.6 billion from P16.2 billion a year earlier as the decline in its interest earnings was offset by a steeper drop in its expenses.

Interest income fell 8% to P22.4 billion in the first half from P24.2 billion the previous year. Meanwhile, interest expense dropped 52% to P3.8 billion from P8 billion, which led to an improved net interest margin of 4.2% as of June from 3.8% last year.

“Lower funding cost and improved margins boosted our net interest income,” China Bank Chief Finance Officer Patrick D. Cheng was quoted as saying.

Meanwhile, fee-based income increased 32% to P6.3 billion in the period from P4.7 billion a year earlier. Mr. Whang attributed this improvement to securities and foreign exchange gains and  higher revenues from bancassurance, as well as from other fees and commissions.

With this, the bank’s net revenues climbed 18% to P24.8 billion from P21 billion.

Meanwhile, operating expenses increased 7% to P11.1 billion in the first semester from P10.4 billion a year earlier. Cost-to-income ratio improved to 45% from 50% the year prior.

China Bank said it remained profitable even as it continued to beef up its provisions for credit losses to P5.4 billion from the P4.8 billion seen a year ago for a consolidated non-performing loan (NPL) cover of 99%. The corresponding coverage ratio for the parent bank was at 114% as of end-June.

The bank’s gross loans as of end-June stood at P596 billion due to lower demand from the businesses due to the uncertain operating environment. On the other hand, retail loans, which made up a fifth of its lending portfolio, rose by 7%.

Its NPL ratio stood at 3.5% as of June. This was higher than the 1.6% logged in the same period last year.

On the funding side, total deposits increased 7% to P827 billion, driven by the 27% growth in its current account, savings account (CASA) deposits to P517 billion. This led to an improved CASA ratio of 63% from 53%.

Time deposits dropped 15% to P310 billion.

China Bank’s assets increased 5% to P1.027 trillion at end-June from P982 million a year prior, while total equity climbed 12% to P110 billion.

The lender’s capital adequacy ratio stood at 15.1%, up from 13.8% in the same period last year, while its common equity Tier 1 ratio was at 14.2%, also higher than the 12.8% recorded as of June 2020. Both were likewise beyond the minimum regulatory requirements.

“The strong execution of our strategies enabled us to rally through the challenges. We are continuously adapting and improving our services and operations to support our customers and the overall economy, and to remain well-positioned for sustainable future growth,” China Bank President William C. Whang said.

China Bank currently has 636 branches and 1,038 automated teller machines (ATM). These include the 160 branches and 167 ATMs of its thrift unit China Bank Savings, Inc.

The listed Sy-led lender’s shares closed at P24.80 apiece on Thursday, up by 80 centavos or 3.33% from its previous finish. — L.W.T. Noble

RELATED ARTICLESMORE FROM AUTHOR