By RUELLE CASTRO
Lenders posted good results for second half of the year, online stockbroker Colfinancial.com said.
All banks in monitors except for Philippine National Bank (PNB) booked higher profit for the period, it noted, with the sector’s aggregate profit growing 23.2 percent, driven by net interest income growth of 14.4 percent and fee-based revenues growth of 13.5 percent.
“This was further boosted by the continued recovery of trading gains which reached P7.4 billion versus the P67 million losses last year. On the other hand, PNB reported lower earnings largely because the bank booked significant gains from the sale of ROPA during the same period last year,” it said.
Colfinancial.com said that compared to estimates, BDO Unibank Inc., EasWest Banking Corp., and Union Bank of the Philippines Inc. outperformed expectations on the back of higher than expected trading gains.
“Furthermore, aside from strong trading operations, BDO and EasWest’s strong results were also driven by lower than expected provisions. On the other hand, China Banking Corp. (ChinaBank), Metropolitan Bank and Trust Corp. (Metrobank), and PNB missed our expectations,” Colfinancial.com said.
ChinaBank underperformed on the back of weaker than expected net interest income.
Metrobank ended slightly below forecast in light of weaker than expected net interest income and higher than expected provisions. PNB meanwhile trailed estimates due to lower than expected asset sale gains and higher than expected operating expenses.
“Meanwhile, Bank of the Philippine Islands (BPI) and Security Bank Corp., ended in line with our estimates,” Colfinancial.com said.
The online stockbrokerage firm said banks’ lending operations in the second quarter sustained their growth, with all banks apart from ChinaBank posting higher net interest income. The period’s net interest income growth was driven mainly by higher interest earning assets.
“Compared to our estimates, BDO, BPI, EasWest, PNB, and Security Bank ended in line with expectations. On the other hand, ChinaBank , Metrobank, andUnion Bank underperformed our forecasts,” it said.
Loan growth meanwhile continues to slow while net interest margins improves from the previous quarter, it said.
“Most banks booked slower loan growth during the second quarter, with seven (BDO, BPI, ChinaBank , Metrobank, PNB, Security Bank,Union Bank) out of the nine banks that we monitor reporting slower growth. As a result, the median loan growth slowed further to 10.8 percent as of end-June 2019 from 11.5 percent as of end-March 2019,” Colfinancial.com said.
“Nevertheless, we expect loan growth to start recovering going forward as we believe that the first half numbers were weighed down by some one-offs such as of the delay in the passage of the 2019 budget as well as the ban on government spending on public works due to the midterm elections. Moreover, we expect some normalization in loan demand as we believe that there will be pressure on loan yields to decline following the 50 bps cut in policy rate. Overall, our medium-term outlook for credit growth remains healthy given the country’s healthy macro-economic outlook,” it added.
Colfinancial.com meanwhile said banks’ median net interest margin (NIM) dropped 10 bps for the period, dragged by higher funding cost.
“However, on a sequential basis, we note that the median net interest margin improved 6 bps quarter on quarter, with seven (BDO, BPI, EasWest, Metrobank, PNB, Security Bank, andUnion Bank) out of the nine banks that we monitor reporting better margins,” it said.
“Overall, we believe these results support our view that funding costs for the banks have already peaked. Going forward, we expect further improvement in net interest margin to come from potential cuts in the reserve requirement ratio as these will ease the tightness in liquidity and lower the banks’ funding costs. However, we believe this might be tempered by lower loan yields as the central bank could continue cutting the policy rate in light of the easing inflation,” Colfinancial.com added.
Banks also continued to book strong trading gains in the second quarter with all banks posting higher trading gains, at a cumulative P7.4 billion, a turnaround from the P67 million losses last year.
“We believe banks have benefitted from the general decline in bond rates. For instance, the 10-year bond rate declined from 5.6 percent as of end-March 2019 to 5.1 percent as of end-June 2019. Currently, the 10-year bond stands at 4.4 percent, suggesting stronger trading gains to come in the next quarter. Meanwhile, compared to our forecasts, the first half trading gains have exceeded expectations, with most banks already breaching our full-year targets,” Colfinancial.com said.