Banking industry profit up 10.7% in Q1

The profits of the country’s major banks improved in the first quarter of the year from year-ago figures but still short of 2013’s record levels as trading operations remained less fruitful.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the shift in the industry’s focus to traditional commercial banking operations from securities trading had paid off as profits in January to March rose by more than 10 percent.

This reversed last year’s dip in earnings caused by volatility in the financial markets, which wiped out income from securities trading.

At the end of March, the country’s 36 universal and commercial banks booked a combined profit of P32.77 billion, up 10.71 percent from last year’s P29.60 billion.

Banks were able to hike interest income to P87.26 billion from P80.72 billion the year before, while interest expense rose to P20.16 billion from P17.26 billion. Net interest income was up to P67.04 billion from last year’s P63.32 billion.

Universal and commercial banks made up about 90 percent of the banking sector in terms of assets and resources. Ample liquidity, prudent lending standards, and sound management have made the industry one of the key pillars for the domestic economy’s strength.

Moody’s Investor Service has a “positive” outlook for the Philippine banking sector, indicating the continued improvement of the industry’s prospects. This is better than Moody’s “stable” or “negative” outlooks for all other banking jurisdictions it covers.

The sector ended the quarter with an average return on equity of 11.07 percent, an improvement from last year’s 10.06 percent. Returns on assets were also better at 1.31 percent at the end of March from 1.28 percent the year before.

In 2014, bank profits shrunk by over 8 percent due to the absence of trading gains.