PH banking system saw record profit in 2024

INQUIRER FILE PHOTO

MANILA, Philippines — The Philippine banking system saw profits grow to a new record high in 2024, with the industry’s net interest income crossing the trillion-peso mark amid high borrowing costs.

Local banks netted P391.28 billion last year, growing by 9.76 percent, according to the latest data from the Bangko Sentral ng Pilipinas (BSP). That was the sector’s highest net profit on available record dating back to 2008.

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Figures showed that such growth was driven by net interest income, which jumped by 13.45 percent to P1.04 trillion.

This was the first time on record that this segment breached the trillion-peso mark.

Meanwhile, noninterest income grew by 5.13 percent to P233.67 billion.

Notably, there was a 16-percent increase in fees and commissions income to P163.31 billion, while trading income climbed by 19.19 percent to P27.39 billion.

Spike in expenses

Those revenues more than offset the 10.37-percent spike in noninterest expenses—like compensation, taxes, impairment losses and provisions—which reached P712.07 billion.

Alfred Benjamin Garcia, research head at AP Securities Inc., said last year’s earnings growth was underpinned by “elevated interest rates” and banks’ increased lending to the higher-yielding but riskier consumer segment.

Still, Garcia said there are indications that banks’ net interest margins started to plateau in the latter part of 2024 after the BSP kicked off its rate-cutting cycle last August.

The BSP had cut the benchmark rate, which banks typically use as a guide when pricing loans, by a total of 75 basis points to 5.75 percent amid easing inflation and slowing economic growth.

But at its first policy meeting for 2025, the central bank—wary of global trade developments—surprised the market by keeping the policy rate steady, which was still among the highest in Asia.

For Garcia, a shallow monetary policy easing this year would somehow help delay the margin erosion of banks.

“However, we’re already starting to see rates come down in response to the previous rate cuts so it’s unlikely that the banks will see the same wide margins that they did last year,” he said.

“Lower rates could help drive demand for loans so we might see volume-driven growth this year instead of margin-driven growth in income,” he added.