Bank profits jump 32% in first half

THE LOCAL banking system’s profits grew by nearly a third in the first half of the year.

In a statement on Monday, the Bangko Sentral ng Pilipinas (BSP) said local banks posted aggregate profits of P33.3 billion in the January to June period, 32% higher than the P25.1 billion notched in the same period the year before.

"The Philippine banking system’s performance for the first semester of 2009 offered a silver lining from the dark clouds of the tempestuous financial storm that rocked the global financial system in 2008," the statement read.

"Banks’ key balance sheet accounts registered respectable growths despite the challenging operating environment."

"The system was able to sustain positive net profits despite the slump in treasury-related activities due to substantial foreign exchange revaluation," he added.

The improvement in revenues resulted from higher profits from banks’ traditional lending business as well as investments, with total interest income reaching P104 billion. This was higher than the P84.9 billion notched in the same six-month period last year.

Non-interest income, which stems from trading gains, fee-based revenues and gains from asset sales, rose to P49 billion from P45 billion a year earlier.

Local banks’ profitability ratios also improved during the period, raising hopes that earnings would be sustained for the rest of the year.

Annualized earning asset yield stood at 7.9%, or 27 basis points higher than the 7.7% at the end of June 2008.

Net interest margin, or the difference between the cost of money borrowed from depositors and the premium charged to borrowers, improved to 4.7%.

The sector’s return on assets and return on equity, however, slipped to 0.9% and 8.1% respectively, from 1.1% and 9.6% respectively.

The system’s capital adequacy ratio stood at 15.3%, well-above the international standard of 8%, and the BSP’s own prescription of 10%.

The sector’s exposure to soured loans relative to total loans, meanwhile, stood at 4% at the end of the first half, roughly the same as the 4.1% ratio at the end of last year.

"If the performance in the first half of 2009 can speak for what lies ahead, the [banking system] has achieved a ‘new normal’ and markets can look forward to a great round of gold," the BSP said.

"With sheer commitment to reforms and sound banking practices, that hole-in-one goal of greater financial stability may not be that elusive after all," he said. -- Paolo Luis G. Montecillo

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Bank profits jump 32% in first half