China Bank beats 2021 profit expectations
Sy family-led China Banking Corp. significantly outperformed the market’s profit expectations in 2021 on the back of higher interest and fee-based earnings as well as effective cost management.
China Bank delivered P15.1 billion in 2021 net profit, up by 25 percent from the previous year. This exceeded by 13 percent the P14.04-billion bottom line that the market was expecting the bank to post for the year, based on Bloomberg consensus forecast.
This performance translated to an improved return on equity and return on assets of 13.6 percent and 1.5 percent, respectively, from 12.1 percent and 1.2 percent in the previous year.
“Our 2021 results reflect our disciplined execution of strategies and commitment to supporting our customers and employees. As we increasingly automate and digitize to navigate the continuing challenges of this pandemic, we are focusing on actions and investments that will redound to superior banking experiences and improved financial outcomes,” China Bank president William Whang said in a disclosure to the Philippine Stock Exchange.
Lower interest expenses
The bank reported a 44-percent drop in interest expense, resulting in a net interest income of P38.3 billion, up by 13 percent. This translated to a better net interest margin of 4.2 percent. Meanwhile, provisioning for probable loan losses was steady at P8.9 billion.
Fee-based income grew by 3 percent to P10.4 billion, underpinned by a 39-percent increase in core fee-based income, such as foreign exchange gains, trust revenues, investment banking commissions, sale of acquired assets, bancassurance fees and other transaction-based service charges.
The growth in operating expenses was contained at 4 percent to P22.3 billion. Sustained efforts to manage expenses while investing in growth strategies resulted in a better cost-to-income ratio. The bank spent 46 centavos to earn every peso last year, lower than the 49 centavos spent in the previous year.
China Bank closed the year with P1.1 trillion in assets, rising by 7 percent, supported by a 9-percent expansion in loans. Meanwhile, deposits increased by 3 percent to P863 billion, driven by an 18-percent build-up in low-cost deposits.
“We deployed more loans to businesses to aid their recovery while continuing to support the credit needs of consumers. We kept a close eye on asset quality, maintaining a lower-than-industry nonperforming loans (NPL) ratio of 2.5 percent and adequate NPL coverage of 116 percent,” said China Bank chief finance officer Patrick Cheng.
He reported that the ratio of low-cost deposits had increased to 64 percent from 56 percent in the previous year.
Total equity increased by 13 percent to P119 billion, with a common equity tier 1 ratio of 14.9 percent and total capital adequacy ratio of 15.7 percent, well above the regulatory minimum required ratio to risk assets.
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