Mid-sized banks report higher profits in Q3

Profits of the country’s mid-sized banks jumped at the end of the third quarter of the year following an increase in earnings from both traditional lending as well as fee-based services.

Smaller banks that serve low-income areas, however, were not as fortunate as they saw their profits in the first half—the latest data available from the BSP—decline as the industry struggled with isolated but high-profile closures, as well as a deterioration of asset quality.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the country’s thrift banks grew profits by 44 percent to P9.5 billion at the end of September over year-ago levels.

Increases were noted in both their lending and non-interest revenue streams, according to BSP data that was released at the weekend.

The sector’s net interest income increased to P25.13 billion at the end of September, up from P22.26 billion the year before. This represents a year-on-year increase of 12.9 percent.

Non-interest income, which include fee-based services such as underwriting and securities dealing, payment services, securitization activities and income from fiduciary operations, also shot up to P12.31 billion from P9.61 billion in the same period of the previous year.

Growth in non-interest income reached 28.1 percent, outpacing the growth in lending revenues.

Meanwhile, the growth in non-interest expenses, which go to salaries, taxes, and regulatory fees, among others, reached 15.1 percent to P24.53 percent.

For their part, smaller rural and cooperative banks saw their profits decline by 13.3 percent in the first semester of the year.

Rural and cooperative bank profits totaled at P1.85 billion in the first six months of 2013.

The industry reported a decline in interest income to P12.06 billion in June from P12.29 billion the same period last year. This decline was offset by the availability of cheap funds, which brought interest expenses down to P3.12 billion in June 2013 from P3.61 billion a year ago.

Non-interest income was flat at P2.81 billion in June from P2.74 billion, but non-interest expenses jumped to P9.24 billion from P8.73 billion in the same period.

According to the Philippine Deposit Insurance Corp. (PDIC), a total of 16 rural and cooperative banks have been ordered closed by the BSP’s Monetary Board since the start of the year. Latest data from the BSP showed that as of March, 13.26 percent and 14.22 percent of all loans held by rural and cooperative banks, respectively, had soured.

In contrast, thrift banks saw their NPLs ease to 6.13 percent of their loan portfolio as of the end of March, from 6.48 percent a year ago.