BANK of the Philippine Islands (BPI) recorded a higher net income in the first three months of 2021 on improved net interest earnings and as it continued to trim its loan loss provisions amid a recovering economy.

The bank’s net profit jumped by 59.6% to P8 billion in the first quarter from a year earlier, it said in a statement on Thursday.

This translated to a return on equity of 11%, while return on assets was at 1.36%.

“The strong performance was attributable to higher net interest income, lower loss provisions, and normalized tax expenses, after last year’s one-time tax adjustments upon effectivity of the CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) law,” BPI said.

Net interest income during the period rose by 12.7% to P19 billion from a year earlier as its net interest margin expanded by 11 basis points to 3.42%.

Meanwhile, non-interest income dropped by 14.5% year on year to P6.4 billion. This was dragged by lower gains from securities trading, service charges, bank commissions, and underwriting fees. The decline was partially offset by foreign exchange trading gains, which increased by more than two times to P702.1 million.

BPI’s total revenues went up 4.3% year on year to P25.4 billion in the January to March period, mainly driven by the rise in the net interest income.

For the first three months of the year, total operating expenses rose by 6.5% to P12.6 billion. BPI attributed this to the broad increase in all cost categories amid higher transaction volumes, amid the economic reopening and relaxed mobility restrictions.

BPI’s cost-to-income ratio was at 49.6% as of end-March.

The lender’s total loans increased 7.1% to P1.5 trillion at the end of the first quarter. This was supported by the growth in corporate (7.7%), mortgage (6.6%), and credit card portfolios (12.2%), which boosted loan volumes.

The bank’s loan loss provisions dropped by 30.6% to P2.5 billion as of end-March from P3.6 billion in the same period of 2021.

These reserves declined as the bank’s nonperforming loan (NPL) ratio improved to 2.38% as of March from 2.49% at end-2021. The NPL coverage ratio stood at 149.6%.

On the funding side, total deposits grew 13.1% year on year to P1.9 trillion. This was driven by current account, savings account (CASA) and time deposits, which rose by 10.9% and 23.3%, respectively.

The bank’s CASA ratio was at 81.0%, while the loan-to-deposit ratio was 77.3%.

BPI’s total assets picked up by 9.88% to P2.4 trillion as of end-March from a year earlier. Total equity stood at P300 billion.

The lender’s common equity Tier 1 ratio was at 16.2%, while capital adequacy ratio stood at 17%. Both are above the regulatory requirements.

The Ayala-led lender’s shares climbed by 20 centavos or 0.20% to P100 each. — Luz Wendy T. Noble