BSP: Banks post higher profits in first half

Universal and commercial banks in the Philippines registered higher profits in the first semester of 2012, the Bangko Sentral ng Pilipinas said. PHOTO BY RICK ALBERTO

MANILA, Philippines—Universal and commercial banks in the country registered higher profits in the first semester, as growth of the economy spurred an increase in demand for loans and other banking products and services.

Monetary officials said the double-digit pace of income growth enjoyed by large banks would also boost their appetite to lend more to consumers and businesses.

Data from the Bangko Sentral ng Pilipinas showed that the combined net incomes of universal and commercial banks reached P55.15 billion in the first half, up by nearly 19 percent from the P46.47 billion reported in the same period last year.

Banks generated P99.07 billion in net interest income, which is revenue out of interests charged on loans less expenses for the payment of interest on deposits. This amount was up by 3.2 percent from the P95.99 billion seen in the same period a year ago.

Non-interest income—which is derived from non-lending services, such as underwriting and dealership of securities, bills payments, wealth management, etc.—amounted to P64.41 billion. This was up by 13.4 percent from P56.8 billion.

Banks posted a significant increase in profit despite the decline in interest rates to historic lows this year.

Industry members said the low-interest rate environment would dampen the interest income of banks. But the institutions are now maximizing revenue sources to counter that dampening effect.

Aurelio Montinola III, president of Bank of the Philippine Islands, earlier said banks would have to compensate for low interest rates by increasing volume of transactions and aggressively wooing more clients.

Montinola said the adverse effect of low interest rates on income per loan transaction could be offset by an increase in demand for loans.

A spike in loan demand is a consequence of cheaper cost of borrowings, he added.

The BSP cut the key policy rates for the fourth time this year.

The key interest rates, which influence commercial interest rates, now stand at historic lows.

Last month’s rate cut brought the overnight borrowing and lending rates of the BSP to 3.5 and 5.5 percent, respectively.