BPI net income in first nine months muted by market volatility concerns

MANILA, Philippines—The Bank of the Philippine Islands posted a muted earnings growth in the first nine months of the year amid renewed market volatility in the third quarter, the Ayala-controlled bank said.

In a disclosure to the Philippine Stock Exchange, BPI said that its net income for the January to September 2011 period reached P9.6 billion, representing a 6-percent growth over the figure reported in the same period last year.

“Despite sustained growth, we are still cautious and monitoring external events and any possible transmission risks to BPI,” bank president and CEO Aurelio Montinola III said in a statement.

“We have therefore decided to focus on the safety of our assets and the maintenance of our yields at the expense of asset growth,” he added. “Given a risk on, risk off environment, we are communicating more with our customers to provide better than foreign market investor returns and robust, diversified lending growth to help the economy.”

Because of the prevailing low interest rate environment, BPI said it opted to grow its loan to deposit ratio with “prudent” domestic loans funded by low cost deposits.

During the period, its asset base of P789 billion and deposits of P625 billion came in just slightly ahead of 2010.

Despite minimal deposit growth, total intermediated funds of P1.3 trillion grew by 20 percent, coming primarily from a 44-percent growth in assets under management.

Loan growth was sustained at 22 percent over 2010 and remained broad-based across market segments and geographically, it said.

The corporate sector loan growth continued to be strong with the following growth rates: top tier corporations (24 percent), middle market (30 percent), SMEs (20 percent), while the consumer loans growth was modest at 11 percent.

Loan to deposit ratio thus improved from 56 percent to 66 percent with the peso component now at 75 percent from 64 percent.

Despite the growing loan portfolio, net 30 days non-performing loans (NPL) remained below the industry average at 2.3 percent with a reserve cover of 115 percent. BPI’s Basel II capital adequacy ratio (CAR) was 15.9 percent while Tier 1 CAR was 14.4 percent.

Return on equity stood at 15.5 percent and return on assets came in at 1.6 percent.

Total revenues were up by 7 percent in the first nine months as net interest income improved by 9 percent, fueled by a P67-billion growth in average asset base.

Non-interest income was just slightly ahead of the previous year as securities trading gain fell short by P809 million from last year as expected. This was however more than compensated for by higher fees and commissions, income from insurance operations, and other operating income.

Operating costs came in higher by 13 percent with half of the increase arising from salary adjustments and collective bargaining agreement-related expenses.

Increases were also seen in premises cost, regulatory costs, and other variable expenses.

With its relatively stable asset quality and sufficient loan loss reserve coverage, BPI booked lower year-to-date impairment losses of P1.5 billion, it said.