Banks’ earnings remain muted

Profits of major Philippine banks grew at a muted pace in the first half of the year amid the industry’s shift away from treasury earnings and corporate lending, to the more difficult but more profitable retail segment.

Data from the Bangko Sentral ng Pilipinas (BSP) showed returns on assets and equity declined at the end of June as interest expenses rose.

The result for the first half extends the reversal of fortunes for Philippine banks, which saw profits decline last year. Muted earnings growth, however, is in line with expectations for the industry, with many players aggressively expanding mortgage, car loan, and credit card businesses.

In recent months, regulators have imposed higher capitalization requirements and other prudential restrictions to curb lending to certain industries, particularly real estate.

At the end of June, universal and commercial banks’ combined net income rose 6.31 percent year on year to reach P61.91 billion.

Return on assets declined slightly to 1.3 percent from the previous quarter’s 1.31 percent, but improved from last year’s 1.20 percent.

The industry’s net interest income rose by 5.96 percent year-on-year to P136.27 billion, while non-interest income improved by 12.44 percent to P63.29 billion.

Standard & Poor’s in a recent report said it may take some time before bank profits reach the record levels posted in 2013.–Paolo G. Montecillo