Chinabank reports flat net income of P5B

MANILA, Philippines—China Banking Corp., the banking arm of the sons of tycoon Henry Sy, reported a flat net income of P5 billion compared to a year ago due to lower treasury gains and asset yields.

This translated to a return on equity of 13.72 percent and a return on assets of 2.04 percent, the bank reported to the Philippine Stock Exchange.

Alongside the bank’s network expansion, the bank boosted its core business with gross loan portfolio growing by 32 percent, or almost three times faster than its average growth for the last decade. This also outpaced the 19 percent industry growth.

By end of 2011, Chinabank’s loan book amounted to P150 billion, with all market segments posting substantial year-on-year growth: corporates at 32 percent, commercial at 37 percent, and consumer at 28 percent.

While expanding its lending activities, Chinabank tightened its focus on loan quality, leading to the drop in non-performing loans to 2.93 percent of total loans last year from 3.89 percent a year ago.

With sufficient provisions for probable losses already in the books, China Bank said it had brought down its loan-loss provisions by 68.7 percent to P155.1 million. Even with this reduction, its loan loss coverage ratio of 143.9 percent remains among the highest in the industry, the bank said.

“The declining asset yields, however, offset the volume growth leading to a flat net interest income,” the bank said.

Meanwhile, the bank continued to grow its low-cost deposit, checking and savings accounts (Casa) deposits. The Casa level expanded by 13.2 percent and its share to total peso deposits increasing to 48.7 percent, curbing the bank’s interest expenses.

Higher contribution from trust fees, sale of acquired assets and bancassurance business compensated for the lower trading and forex gain.

Chinabank more than doubled its number of branches from 141 in 2006 to 293 by end of 2011. Last year, 24 branches were opened, 15 for the main bank and nine for the savings bank. This is in line with the bank’s goal of 400 branches by 2014 to ensure growth in market share in the future.

The annual operating drag of the branches opened in the last five years is roughly P1 billion annually. However, most of the older branches (opened during the expansion period) are already making money and contributing to the bottom line, the bank said.

Despite the expansion, China Bank said it continued to be one of the most-cost efficient banks in the industry with a cost-to-income ratio of 55.19 percent.

Total resources improved by 1.9 percnt to P262.21 billion while total deposits reached P216.13 billion. Capital funds reached P39.29 billion, 10.8 percent more than in 2010. Capital adequacy ratio (CAR) to risk assets stood at 17.79 percent and Tier 1 CAR was at 16.97 percent or much higher than the minimum regulatory requirement.