Bangko Sentral sees bank profits dipping

Bank profits may dip in the next 12 months amid volatile interest rates, which is seen to make it harder for lenders to make bets in their trading operations, the Bangko Sentral ng Pilipinas said. FILE PHOTO

MANILA, Philippines—Bank profits may dip in the next 12 months amid volatile interest rates, which is seen to make it harder for lenders to make bets in their trading operations, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Nestor A. Espenilla Jr. said that despite a likely dip in earnings, the sector would remain healthy, allowing lenders to meet the growing economy’s demand for cash.

“Some of them will experience lower than projected income because of the movement of interest rates,” Espenilla told reporters.

Latest data from the central bank showed that the country’s universal and commercial banks posted a combined profit of P114.34 billion as of the end of the third quarter of 2013, significantly higher than the P80.11 billion registered in the same period in 2012.

Interest rates are expected to rise across the board this year as a result of the tapering of the US Federal Reserve’s $85 billion-a-month bond buying program.

The Fed’s asset purchases that started in 2009 have resulted in a surge in the flow of funds into emerging markets, helping push interest rates down, currencies stronger and stock prices higher.

The bond-buying program was introduced to infuse freshly-printed cash into the US economy to aid in its recovery from the global financial crisis the year before. The Fed said it would slow down its bond-buying by $10 billion starting this month.

With these asset purchases now slowing down, fund managers from around the world have started to reassess their portfolios to shift some of their funds back to advanced economies like the United States.

For his part, Espenilla said regulators were not worried over the prospect of banks posting lower profits, noting that the industry had enough buffers to withstand temporary pressures.

“We’re quite comfortable with how the things are. Even with the tapering, they are stable,” Espenilla said. “It does no bearing on the fundamental strength of the banks. Of course there will be swings in profitability,” he said.

“Credit will continue to grow strongly and profitable because asset quality is good and debt losses are minimal,” he added.