CHINA BANKING CORP. (China Bank) posted a higher net profit in the first semester, driven by increases in its net interest and core fee incomes, as well as lower provisions for bad loans.

China Bank recorded a P10.1 billion net income in the first six months of 2022, up by 39% from the P7.3 billion booked in the same period last year, it said in a disclosure to the stock exchange on Thursday.

This translated to a return on equity of 16.4% and return on assets of 1.7%.

“The sustained growth puts China Bank in a stronger position to support customers and the economy in this period of recovery,” China Bank President William C. Whang said in a statement.

“For the 2Q 2022 period, China Bank’s net income breached the P5-billion mark, a first in the Bank’s more than 100-year-old franchise,” Chief Finance Officer Patrick D. Cheng said.

Net interest income grew by 16% to P22 billion in the first semester from P18.9 billion last year, driven by stronger revenues and steady interest expense. As a result, net interest margin was at 4.3%.

Meanwhile, the depreciation in the bank’s trading and foreign exchange gains caused its fee-based income to decline to P3.2 billion, 46% lower from P5.9 billion in the comparable period. 

Still, core fee income increased by 24% due to double-digit increases in earnings from service charges, fees and commissions, the sale of acquired assets, and bancassurance.   

“Efficiency enhancements and judicious cost management kept operating expenses flat year on year, further improving cost-to-income ratio to 44%,” the bank said.

The bank’s loan portfolio expanded by 14% to P655 billion as of June from P576 billion last year on the back of significant growth in both business and consumer credit.   

Gross nonperforming loans (NPL) ratio was at 2.3%, 120 basis points (bps) lower than last year’s 3.5%. Meanwhile, NPL cover stood at 128%.

Amid improved asset quality, China Bank cut its credit provisions by 69% to P1.7 billion from P5.4 billion in the same period in 2021.

Total deposits also increased by 14% to P945 billion from P827 billion in June 2021 amid a 14% year-on-year growth in current and savings accounts.

As of June, China Bank’s consolidated assets stood at P1.2 trillion, 17% higher than the P1.02 trillion in the same period in 2021.

Total equity jumped by 16% to P127 billion, with the bank posting a common equity Tier 1 ratio of 14.8% and a capital adequacy ratio of 15.7%, both above the regulatory minimum.

China Bank’s shares closed unchanged at P26.90 apiece on Thursday. — K.B. Ta-asan