China Banking Corporation reported a 39 percent jump in net income to P7.3 billion in the first half of 2021 despite higher provisions as its core businesses delivered strong performances.

In a disclosure to the Philippine Stock Exchange, the bank said this translated to an improved return on equity of 13.4 percent and better return on assets of 1.4 percent.

The 100-year old bank sustained its profitability even as it continued to build up its loan loss provisions, recognizing P5.4 billion in pandemic-related credit buffers in the first semester, up 13 percent year-on-year.

“The strong execution of our strategies enabled us to rally through the challenges. We are continuously adapting and improving our services and operations to support our customers and the overall economy, and to remain well-positioned for sustainable future growth,” said China Bank President William C. Whang.

Net revenues rose 18 percent to P24.8 billion, reflecting strong growth in net interest income and fee-based income.

The significant reduction in interest expense led to an improved net interest margin of 4.2 percent from 3.8 percent.

“Lower funding cost and improved margins boosted our net interest income by 14 percent to P18.6 billion,” said China Bank Chief Finance Officer Patrick D. Cheng.

He added that, “With the easing of quarantine restrictions, our fee-based income recovered, and we saw a 32 percent increase to P6.3 billion on the back of robust securities and foreign exchange gains and higher revenues from bancassurance and other fees and commissions.”

With the enhancements in productivity and efficiency, operating expenses were controlled at P11.1 billion, up 7 percent. Cost-to-income ratio consequently improved to 45 percent.

China Bank continues to be one of the largest banks in the country, with P1 trillion in assets as of end-June 2021.

“We are taking proactive measures to maintain a healthy balance sheet as we remain supportive of our customers to help them recover,” said Cheng.

Gross loans were flat at P596 billion as the commercial segment put its expansion plans on hold amid the uncertain business climate. Meanwhile, loans to the consumer segment grew 7 percent and accounted for about a fifth of the total loan portfolio.

Gross non-performing loans (NPL) ratio stood at 3.5 percent as the economic slowdown continued to affect borrowers’ paying capacity.

The Bank beefed up its credit buffers in anticipation of rising defaults, for a consolidated NPL cover of 99 percent. The corresponding coverage ratio for the parent bank was at 114 percent.

On the funding side, total deposits grew 7 percent to P827 billion, underscored by a 27 percent increase in current and savings account (CASA) deposits to P517 billion. This led to an improved CASA ratio of 63 percent from 53 percent.

China Bank’s total equity rose 12 percent to P110 billion, sustaining strong capital ratios of 15.1 percent total Capital Adequacy Ratio (CAR) and 14.2 percent Common Equity Tier 1 (CET1).

“As we continue to strengthen the fundamentals of the Bank, our priority is to protect our people,” said Whang.