China Bank Q1 profit up by 27%

MANILA, Philippines — China Banking Corp. grew its first quarter net profit by 27 percent to P1.1 billion year-on-year on higher interest and fee-based earnings, hefty trading gains and sale of some idle assets.

During its annual stockholders meeting late Wednesday, the bank likewise approved the declaration of a 10-percent stock and P12 per share cash dividend worth a total of P1.42 billion. The cash dividends represented 27.9 percent of the bank’s earnings per share of P43.02 last year.

The stockholders also approved a ten-for-one stock split of the bank’s common shares to provide more domestic liquidity to China Bank’s shares. This means that shareholders will receive 10 shares for each share held.

For the first quarter, the P1.1 billion net income translates to a return on equity of 11.02 percent and a return on assets of 1.64 percent.

China Bank president Peter Dee said: “We are delighted to report an improvement in our core earnings—this performance continues to be supportive of our regular dividend payments to shareholders.”

During the quarter, the Bank reported strong growth in loans and fee-based income but modest growth in deposits, while experiencing thinner margins from the continuing decline in asset yields.

The bank’s customer loans portfolio stood at P154 billion by end-March, up by 34 percent from a year ago, driven by higher bookings from retail, commercial, and consumer borrowers. Despite the drop in lending rates, the higher loan volume boosted interest income from loans and receivables by 15 percent.

Fee-based income also improved by 166 percent alongside hefty trading and foreign exchange gains as the bank took advantage of favorable market conditions.

Higher contributions from trust operations also contributed to the first quarter results as trust fees increased by 25 percent on higher volume of assets under management. The sale of acquired assets also contributed to the first quarter results.

Total resources stood at P272 billion, up by 14 percent from the same period last year.

The bank’s deposit base expanded by 14 percent to P222 billion with total low-cost deposits at P81 billion. About 67 percent of deposits had been lent out.

On asset quality, tighter monitoring of loans quality led to a drop in non-performing loans by P737 million, reducing China Bank’s non-performing loans ratio to 2.8 percent. The bank also booked an additional P100 million in provisions for probable loan losses, bringing up its loan loss coverage ratio to 148.72 percent.

On the expense side, China Bank said that as it carried out its expansion program, operating expenses rose by 26 percent, mainly from higher compensation, taxes and licenses, and occupancy costs. But the bank even improved its cost efficiency with a cost-to-income ratio of 60.18 percent, slightly better than the 61.41 percent reported last year. This ratio means that the bank spent around 60 centavos to earn every peso.

Total capital funds rose by 15 percent to P40.32 billion, equivalent to a tier 1 capital adequacy ratio of 15.97 percent — still one of the strongest in the industry.

Dee also noted that the bank had been consistently providing good returns to shareholders through substantial cash and stock dividends. In 2011, it paid P12 per share in cash dividend for a total of P1.3 billion and a 10 percent stock dividend.

China Bank, led by the family of Henry Sy Sr., has 300 branches and 480 automated teller machines nationwide, including those of thrift bank subsidiary China Bank Savings.