PHILIPPINE NATIONAL BANK (PNB) saw its net income drop 73.14% to P2.6 billion last year from P9.68 billion in 2019 amid increased provisions for loan losses due to the pandemic.

The Tan-led lender said in a disclosure to the local bourse on Thursday that its net profit before provisions for impairment and taxes rose by 17% year on year to P17.6 billion.

PNB set aside P16.9 billion in provisions for credit losses last year, five times higher than the year-ago level. It allocated loan loss reserves for the worst-hit sectors during the pandemic, including real estate, transportation, wholesale and retail trade to manage risk exposures.

The bank’s net interest earnings, which accounted for 79% of its total operating income, grew by 10.69% to P35.82 billion last year from P32.36 billion in 2019.

The lender said interest expense on deposits went down by more than half even as total deposits increased by 7.8% to P890.3 billion from P826 billion in 2019. This, as  the majority of additional deposits were low-cost funds and as the bank settled P7 billion in maturing long-term negotiable certificates of time deposit last year.

Meanwhile, interest income from loans went down by 6% on muted credit demand during the pandemic.

Its loan portfolio went down by 9% year on year to P600 billion.

“This reflected the weak demand for loans owing to economic uncertainties as well as PNB’s strategy to focus on strengthening its liquidity position by investing most of the available funds in short-term and more liquid placements to remain resilient during the pandemic,” the bank said in a statement.

Non-interest earnings, on the other hand, grew on the back of favorable market opportunities, with gains in trading securities jumping by threefold to P3.3 billion, PNB said. This offset the 9.5% decline (to P4.68 billion) in profits from service fees and commissions due to reduced banking transactions.

The bank recorded total operating expenses worth P44.79 billion last year, 56% higher than the P28.67 billion seen in 2019.

PNB’s consolidated resources reached P1.2 trillion as of end-December, 8% higher than the year-ago level. The bank’s capital adequacy ratio stood at 15.14%, while its common equity Tier 1 ratio was at 14.47%, both above the minimum required by the regulator.

“The economic fallout from the COVID-19 pandemic made it necessary for PNB to adopt a more prudent approach in asset deployment and recognize substantial credit provisioning which adversely impacted its bottom line in order to protect the balance sheet,” PNB President and CEO Jose Arnulfo “Wick” A. Veloso was quoted as saying in the statement.

“However, we remain confident that these strategies, along with our planned tactical moves will ensure that the bank will emerge from the crisis stronger in the long-run,” Mr. Veloso added.

PNB’s shares closed unchanged at P23.30 apiece on Thursday. — B.M. Laforga