[ malaya.com.ph ] May 2, 2008
The Bank of the Philippine Islands reported that housing and credit card loans are propelling its loan growth for the first quarter.
Net loans increased by 14 percent from the previous year, ahead of the industry’s 9 percent growth.
Business segments, which reflected notable results, were middle market, small and medium scale enterprises (SMEs), and consumer with growth rates of 18 percent, 18 percent and 21 percent, respectively.
Housing loans remained to be a major driver of consumer loan growth with new loans granted in the first quarter increasing by 36 percent, thereby pushing outstanding portfolio higher by 26 percent.
Credit card billings likewise increased by 26 percent. Lending to the top corporates was however flat versus the previous year and, as in prior years’ pulled down the overall loan levels from end 2007.
Deposits expanded by 4 percent to P475 billion from the previous year, but were 7 percent below the year-end level. Asset Management and Trust Assets grew by 24 percent to P276 billion.
For the moment, given the deteriorating world financial markets, the bank intends to keep its balance sheet flattish while allowing its premium clients to shift their investments to higher yielding investment alternatives.
The bank also made a conscious effort to trim its sails in the foreign currency markets and look for safe haven assets as early as in the second half of last year. So while BPI registered significant peso loan growth, the more complex operating environment tempered the bank’s profitability.
The 300 basis points cut in the US Federal Funds rate from 5.25 percent to 2.25 percent further caused a drastic decline in the bank’s foreign currency asset yields upon reprising and replacement of mature securities inventory.
Domestically, inflationary pressures escalated thereby reversing the direction of the interest rate movement. The bank responded by shortening duration of its peso securities inventory to avert potential losses that may arise from further rise in interest rate. This however resulted in lower peso asset yields following the lower yields on replacement securities.
The bank’s total revenues thus fell by 26 percent as both interest and non-interest income contracted from the previous year, despite P28 billion in average asset base growth. The rising interest rate scenario provided limited opportunities to generate securities trading gains. In addition, last year’s income of the insurance subsidiaries included a P416 million non-recurring gain on a sale of a property. These two (2) items were mainly responsible for the 46 percent decline in non-interest income. Notwithstanding a 6 percent decline in operating expenses, first quarter net income amounted to P1.5 billion, lower than the P3.2 billion realized in the same period last year.
Market capitalization remained the largest in the industry at P136 billion as against book value of P64 billion, even as volatile global and local financial market conditions negatively affected the bank’s share price performance. The bank recently declared a 20 percent stock dividend which was approved by it shareholders in the last annual general meeting.
The bank expects the rest of the year to be as challenging as the first quarter, as financial market conditions remain volatile and uncertain. BPI intends to ride out this financial storm by focusing on its strong suits in key banking businesses, enhancing risk management structures, and consistently relying on technology to deliver customer service and operating efficiency.
______________________________________________________________________
