PNB books lower net earnings in the third quarter

PHILIPPINE National Bank (PNB) booked a lower net income in the third quarter as it set aside more loan loss provisions.

The bank’s attributable net profit plunged 87.55% year on year to P270.14 million in the third quarter from P2.17 billion last year, based on its financial report disclosed to the local bourse on Monday.

The lender said its net income dropped in the third quarter “mainly due to the recognition of P3.9-billion additional provisions for impairment, credit and other losses for the third quarter of 2022.”

The third-quarter performance brought the Tan-led lender’s attributable net earnings for the first nine months of the year to P11.31 billion, 53.36% lower than the P24.25 billion booked in the same period of 2021.

Return on average equity stood at 8.5% as of September, down from 14% a year ago. Return on average assets also went down to 1.2% from 1.8%.

The decline in the bank’s nine-month income was attributed to a one-off gain of P33.6 billion in 2021 from the transfer of prime real estate properties in exchange for shares of PNB Holdings Corp.

Taking out the effect of the one-off transaction, PNB’s operating income increased by 14% year on year in the nine-month period, it said.

“PNB continues to be profitable as it showed improvements in efficiency pushing our momentum towards achieving our strategic priorities,” PNB Acting President Florido P. Casuela said in a statement.

“Our results indicate that we have the right strategy to deliver real value to our clients, our investors, and the overall economy in these challenging times,” he added.

PNB’s net interest income in the third quarter grew by 5.96% to P9.43 billion from P8.9 billion in the same quarter in 2021 on the back of higher yields on investment securities, deposits with banks, and interbank receivables.

This brought the nine-month total to P26.78 billion, higher by 3.96% from the same period last year, amid higher interest rates.

The bank’s net interest margin as of end-September was at 3.4%, inching up from 3.3% last year.

Meanwhile, net income from service fees and commissions went down by 17.02% to P1.17 billion in the third quarter from P1.41 billion a year ago amid lower loan, credit card-related, and bancassurance fees. For the first nine months, net service fees and commission income declined by 8.27% to P3.55 billion.

Other income also dropped by 7.67% to P927.92 million in the three months ended September from P1.005 billion in the same period in 2021 as gains from the sale of loans in September 2021 propped up its earnings last year. Still, this was partly offset by higher net trading and foreign exchange gains seen in the period this year.

For the first nine months of 2022, other income went down to P7.31 billion from P37.03 billion last year due to a one-off gain in 2021 and net trading and investment securities losses this year.

PNB’s operating expenses rose 14.15% to P7.34 billion in the third quarter. Year to date, operating expenses grew 12.27% to P22.24 billion due to property sale taxes as well as higher amortization costs for its leased properties that were the subject of the properties-for-shares swap conducted last year.

The bank’s provisions for impairment losses more than doubled to P3.87 billion in the third quarter from P1.42 billion a year earlier.

This brought PNB’s provisions for the first nine months to P714.088 million, down from P20.445 billion in the same period of 2021, when the bank built up its loan loss reserves in anticipation of higher nonperforming loans due to the pandemic.

“The bank’s gross loan portfolio expanded to P638.3 billion as of end-September 2022, slightly up by 1% from the loan level last year as the bank further stretched its lending to large corporates during the period,” PNB said.

Despite the slight growth in loans, the bank’s gross nonperforming loan (NPL) ratio went down to 6.4% at end-September from 10.8% a year earlier, while its net NPL ratio was at 2.6%, down from 5.2% a year prior.

Its NPL coverage ratio was at 82% as of September, up from 60.1% a year ago.

“Likewise, the bank continued to build up its current and savings deposits, resulting in a modest 1% increase in total deposits from year-ago level, tempered by the bank’s initiatives to further trim down high-cost time deposits, amid the rise in benchmark interest rates,” PNB added.

The bank’s consolidated total assets increased 1% to P1.15 trillion as of September, backed by higher loans and treasury assets.   

Its capital adequacy ratio stood at 14.3% as of September, up from 14.3% last year, while common equity Tier 1 ratio was at 13.8%, also higher than 13.5% a year prior. Both are above minimum regulatory requirements.

PNB closed at P19.70 each on Monday, rising by 34 centavos or 1.76%. — K.B. Ta-asan