Banks post double-digit rise in first-half income

Universal and commercial banks posted a double-digit rise in income in the first half, reinforcing the regulator’s view that the country’s banking sector remains stable despite the problems abroad.

Data from the Bangko Sentral ng Pilpinas showed that universal and commercial banks generated a combined net income of P46.47 billion in the first semester—up by 24 percent from the P37.60 billion seen in the same period last year.

Profit was boosted by banks’ lending activities and other businesses, such as underwriting, bills payment, remittance facilitation and custodianship.

“The first semester performance of the banks was a reflection of the continuing good overall performance of the banking system. The increase in profitability shows that they can weather the impact of the external crisis,” BSP Governor Amando Tetangco Jr. told reporters Friday.

The crisis Tetangco was referring to was the debt problems now facing most European banks.

In particular, Greece could default on its liabilities at any time, raising fresh concerns among holders of bonds issued by that country.

The BSP said the Philippine banking sector is virtually unharmed by the crisis in Europe because of prudent regulations and sound banking practices.

Industry players said banks in the Philippines have very limited exposure to problems in the West and majority of the institutions are highly liquid.

The BSP said that, apart from the improvement in the profitability of universal and commercial banks in the country, there have been other favorable indicators, such as low exposure to bad debts and high capitalization.

Tetangco said that even thrift and rural banks are healthy.

Asked to comment on the impact of the recent closure of thrift bank LBC Development Bank on the country’s banking system, Tetangco said it was not expected to affect the stability of the entire sector or the confidence of the public in banks.

He said banks ordered closed by the BSP were isolated cases. Earlier this year, the BSP also ordered the closure of Banco Filipino.

Both LBC Development Bank and Banco Filipino had become insolvent by the time the regulator stepped in, the BSP said.

The central bank said sustained profitability of the banking sector would help it aid in its effort to boost growth of the economy, which registered a slowdown in the first half, through robust lending.

The economy grew by 4 percent in the first semester of 2011, slower than the over 8 percent registered in the same period last year.

Economists said the slowdown was due to underspending by the government and weak global demand for the country’s exports due to the crisis in the West.