Banking sector posts 41% jump in Q1 profit

The combined net income of universal and commercial banks operating in the country surged by 41 percent in the first quarter of the year to P30.45 billion from P21.66 billion in 2011.

The Bangko Sentral ng Pilipinas said the accelerated growth of the economy fueled the increase in demand for banking products and services.

Monetary officials said the favorable performance of the banking sector in the first three months of the year indicated its capability to help further stimulate economic growth in the remainder of the year. The officials said the banks could use portion of the profits they realized in the first quarter to boost their resources for lending to investment projects.

BSP data showed that the substantial growth in the banks’ net income was largely driven by non-interest incomes or those generated from underwriting, custodianship and remittance-facilitation activities.

The banks’ non-interest income in the first quarter, according to data from the BSP, grew by 25 percent to P31.86 billion from P25.51 billion in the same period last year.

The amount represented revenues from foreign-exchange operations and fees/commissions charged by banks on clients for services that included payments and wealth management.

Interest-earning activities, such as lending and treasury operations, also made significant contribution to the overall growth.

Net interest income as of the end of March reached P41.35 billion, up by 0.5 percent year on year from P41.56 billion.

Industry players said the growth in earnings from interest-earning activities was slower mainly because of the low interest rate environment.

Interest rates are seen to remain low as the BSP is inclined to keep its policy rates unchanged. Both its overnight borrowing and lending rates are at their historic lows of 4 percent and 6 percent, respectively.

Bankers said demand for various financial services was significantly higher in the first quarter this year, compared to year-ago level, because of the substantial increase in economic activities during the period.

In the first quarter, the economy posted a stronger-than-expected growth of 6.4 percent.

The government said the first-quarter performance made the full-year growth target of between 5 and 6 percent attainable.

Industry players said the banking sector would help the country achieve its growth target through higher lending. They said banks were keen on lending to enterprises that were interested in investing in key public infrastructure projects being pushed by the government.

The industry expects a 10- to 15-percent rise in lending this year.

Outstanding loans extended by universal and commercial banks reached P2.8 billion as of the end of March, up by 18.7 percent from P2.37 billion in the same period last year.