Banks seen to remain robust this quarter

Banks could continue to post strong performances this quarter after mostly recording higher earnings in the first three months of 2024, analysts said.

“So long as nonperforming loans remain manageable and loan growth continues to be stable, then second quarter earnings should still perform within or above market expectations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The Philippine banking industry’s net profit rose by 2.95% to PHP 92.107 billion in the first quarter from PHP 89.47 billion in the same period last year, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

“Macroeconomic indicators such as economic growth, inflation rates, and employment figures provided a backdrop for banks’ performance,” Mr. Limlingan said.

He added that lenders’ profitability on the first quarter was affected by high interest rates and changes in central bank policies.

He noted that Bank of the Philippine Islands (BPI) and China Banking Corp. (Chinabank) were top performers during the period, posting robust loan growth, improved asset quality, diversified revenue streams, and effective cost management.

BPI saw its net income grow by 25.8% year on year in the first quarter to PHP 15.3 billion as higher revenues helped offset increases in loan loss provisions and operating expenses.

Meanwhile, Chinabank saw an 18% increase in its net profit to PHP 5.9 billion in the same period on the back of robust core business growth.

For her part, First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message that banks could see easing margins in the coming months amid higher funding costs.

There is “competitive pressure to rise and prompt banks to seek bigger business volumes, lending and fee income,” she added.

Banks could also struggle in the third quarter due to elevated overhead costs, Ms. Ulang said.

Meanwhile, lenders that have invested in technology could see reduced costs, resulting in enhanced efficiency, she added.

Banks could offset elevated costs through trading income if the Bangko Sentral ng Pilipinas (BSP) implements a rate cut in the third quarter, Ms. Ulang said.

BSP Governor Eli M. Remolona, Jr. has said the central bank could begin its easing cycle with a 25-basis-point (bp) cut as early as the Monetary Board’s Aug. 15 meeting, and could slash borrowing costs once or twice within the second semester.

The BSP raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023, bringing its key interest rate to a 17-year high of 6.5%. — Aaron Michael C. Sy