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loan loss buffer hiked by 51% due to COVID-19 uncertainties

Chinabank’s Q1 profit up 19%

/ 02:54 PM May 07, 2020

Photo from www.chinabank.ph

Sy family-led China Bank Corp. grew its net profit in the first three months by 19 percent year-on-year to P2.2 billion as higher lending volume and margins boosted interest earnings.

Robust lending activities made up for slower trading gains and the hefty increase in loan loss provisioning expense that was booked in anticipation of a possible spike in credit losses arising from the coronavirus (COVID-19) pandemic.

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“The impact of the COVID-19 pandemic on our customers, employees, and society as a whole is a great concern for China Bank.  We are committed to extend the help, support, and flexibility that our stakeholders need in these challenging times to ease the negative economic consequences of this global health crisis. We are also very grateful to our hardworking and dedicated frontliners who enable us to deliver on this vital commitment,” China Bank president William Whang said in a disclosure to the Philippine Stock Exchange on Thursday.

China Bank increased loan loss provisions by 51 percent year-on-year to P412 million in the first quarter. The bank now has a loan loss buffer amounting to P1.09 for every P1 of loans that have turned sour.

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The three-month performance translated to return on equity of 9.15 percent and return on assets of 0.92 percent.

Total operating income rose by 26 percent year-on-year to P9.1 billion.
 
Net interest income grew by 34 percent to P7.9 billion from the previous year on the back of higher revenues from earning assets as well as lower interest expense, which dropped by 23 percent.  Net interest margin improved to 3.82 percent from 3.32 percent.

China Bank expanded its loan book by 15 percent to P592 billion, citing strong demand across all customer segments. On the funding side, deposits rose by 9 percent to P785 billion. 

For every peso of deposits generated, the bank turned 74 centavos into earning assets through its lending activities.

On the other hand, weaker market conditions gnawed on the bank’s trading activities and fee-based income.
 
Operating expenses increased 22 percent year-on-year to P5.8 billion as the bank expanded its operations and provided for COVID-19 related expenses. Nevertheless, efficiency improved as it spent only 64 centavos to earn every P1 during the quarter compared to 66 centavos in the same period last year.

Despite the scaled-down branch operations in Metro Manila and the rest of Luzon starting mid-March, total assets expanded by 10 percent year-on-year to P984 billion.
 
On asset quality, China Bank’s bad loans were stable at 1.7 percent as a ratio of total loans.

The bank’s total capital stood at P97 billion, with regulatory capital ratios well above regulatory levels.
 

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TAGS: CHIB, China Banking Corp., Chinabank, William Whang
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