With banks’ higher provisioning requirements, the industry continue to have lower cumulative net profits as of end-September of P126.78 billion, down 25.93 percent from same period last year of P171.16 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

The pandemic-hit banking system however reported higher net interest income of P490.80 billion, up by 10.74 percent year-on-year from P443.20 billion and a non-interest income of P169.90 billion, also up by 18.62 percent from P143.23 billion. Trading income increased by 69.87 percent to P93.56 billion from P55.07 billion.

In the meantime banks’ combined non-interest expenses rose by 1.35 percent at P361.46 billion compared to P356.63 billion.

The 46 universal and commercial banks accounted for bulk of industry net profits. As of end-September, this was at P117.07 billion which was lower by 24.84 percent from same time in 2019 of P155.76 billion.

Big banks’ net interest continue to grow, it rose by 13.73 percent year-on-year to P432.41 billion from P380.20 billion while non-interest income increased by 23.24 percent to P158.55 billion from P128.65 billion.

The 48 thrift banks’ net profits also declined by 24.76 percent to P8.29 billion as of end-September from P11.02 billion in end-September 2019. The sector’s net interest income went up by 6.33 percent to P47.72 billion from P44.69 billion while non-interest income dropped by 5.24 percent to P8.78 billion from P9.27 billion.

The BSP in a report said provisions on credit losses for loans and financial assets were increased significantly and this has weighed “heavily” on the profits of banks. “Other income sources are expected to slow down due to lower volume of transactions, waiver of inter-branch and interbank fees as well as the temporary grace period moratorium on the imposition of bank fees, penalties and charges under the Bayanihan Act,” said the BSP.

Still, based on the BSP’s financial soundness indicators (FSI), the banking system remains “stable and resilient despite global uncertainties related to the extent and path of COVID-19 menace.” But the FSI review also implies that “consequent risks from lending should be monitored especially in the event of excessive uncertainties that could place additional pressures on the banking system in the short and medium run.”

The BSP said to counteract and cushion the adverse impact of the pandemic on profitability, banks are planning or are already implementing cost-cutting measures such as deferred capital spending and freeze hiring of non-critical positions. The industry is also intensifying loan collection activities, step up loan monitoring, exercise prudence in loan releases, reduce cost of funds and boost

marketing campaigns for new loans and deposits, based on the BSP survey.

 “Across banking groups, (the big banks) also intend to reduce their exposures to vulnerable sectors and to increase ancillary or fee-based business while thrift banks and rural/cooperative banks plan to fast track digitization initiatives to reduce operating expenses,” said the BSP.