Banks’ 2018 income boosted by rate hikes
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Sun, 10 Feb 2019 16:15:21 +0000
Double-digit interest income growth allowed Philippine banks to post profit gains last year despite bad debts and investment losses.
Preliminary central bank data indicated that the banking system’s net income hit P178.83 billion in 2018, 6.4 percent higher compared to the P168.07 billion posted in the previous year.
Aggregate operating income totaled P660.21 billion, up 11.7 percent from P590.78 billion in 2017 as net interest income increased 13.9 percent to P509.72 billion from P447.39 billion.
The impact of key interest rate hikes — a total of 175 basis points — ordered by the Bangko Sentral ng Pilipinas last year in response to surging inflation is still filtering through the financial system.
Banks’ non-interest income, meanwhile, grew 4.9 percent to P150.48 billion last year — compared to P143.38 billion in 2017 — due to higher dividends, fees and commissions, and trading profits.
Dividend earnings rose by 1.2 percent to P3.36 billion, fees and commissions expanded by 6.9 percent to P90.65 billion, and trading income gained 3 percent to P41.76 billion.
Banks, however, incurred P2.89 billion in losses from the sale or redemption of securities, a reversal from the P11.32-billion income recorded in 2017.
The banking system’s provision for credit losses on loans and other financial assets, meanwhile, totaled P35.19 billion in 2018, marginally higher than the P34.97 billion recorded the previous year.
Losses from bad debts written off by banks also increased by 1.8 percent to P3.35 billion, from P3.29 billion in 2017.
During last month’s annual BSP reception for the banking community, central bank officials said the Philippine banking system remained sound and stable in 2018 despite challenges such as higher domestic inflation and volatility overseas.
“The consistently sound and stable condition of the Philippine banking system — a product not only of prudent regulation and risk-based supervision, but of earnest cooperation from the sector itself — is a key anchor of our growing economy,” central bank Governor Nestor Espenilla said in a speech read by Deputy Governor and officer-in-charge Chuchi Fonacier.
Philippine banking system was said to have continued to expand, due mainly to deposit growth.
“Most of these deposits were deployed to lending for productive activities. Loan quality remains satisfactory as banks continue to adhere to sound credit underwriting standards,” Espenilla said.
In the meantime, capitalization continues to build, with capital ratios remaining well above national and international thresholds, he noted.
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