Despite solid 2020, PBB feels ‘trepidation’ up ahead

Zest-O group-led Philippine Business Bank (PBB) grew its third quarter net profit by 12.5 percent year-on-year to P501.19 million as higher interest earnings and trading gains made up for bigger loan loss provisioning, an imperative during the pandemic.

The bank’s nine-month net profit hit P1.02 billion, up by 26.5 percent from the same period last year even if it more than tripled its credit loss buffer.

“After a thorough review of its portfolio, the bank determined that asset quality is showing some weakness. As a precautionary measure, the bank increased its loan loss reserves to P950 million for the first nine months of 2020, almost 3.5 times higher than the P275 million in the same period last year. We expect to increase our reserves as the impact of this pandemic unfolds,” said PBB Roland Avante, vice chair, president and chief executive.

The bank’s bad loans spiked to 4.23 percent of total loans as of end-September from only 2.33 percent at the end of 2019. As of end-September, bad loans stood at P3.67 billion, while credit loss provisions amounted to P2.72 billion.

Avante said that while PBB’s performance this year remained strong, the next few years would likely be challenging given the weakness in the economy and the unabated number of COVID-19 cases.“We see downward pressure in NIMs (net interest margins) moving forward as the industry seeks to protect its portfolio of good names. While we are taking steps to mitigate the risks associated with the pandemic, the situation is evolving and this is causing us some trepidation despite solid 2020 earnings,” he added.

In the third quarter alone, PBB’s net interest income expanded by 12.3 percent year-on-year to P1.42 billion, while trading gains soared by 1,193 percent year-on-year to P398.36 million.

For the nine-month period, PBB’s net interest income grew by 31.2 percent year-on-year to P4.22 billion as the bank increased its earning assets while NIMs likewise improved.

The bank’s loan book grew by a modest 3.2 percent year-on-year to P87 billion while NIM increased by 86 basis points to 5.19 percent from the year-ago level.

Meanwhile, trading income rose by 173.3 percent year-on-year to P660.2 million at end-September.

On the funding side, the bank generated P91 billion worth of deposits at end-September, up by 2.9 percent year-on-year. Low-cost funds grew by 22.8 percent, accounting for 51 percent of total deposits compared to 43 percent last year.—Doris ­Dumlao-Abadilla INQ