Banks’ cumulative net profits for the first three months grew by 26.3 percent to P66.34 billion from same time in 2021 of P52.52 billion.
Based on Bangko Sentral ng Pilipinas (BSP) numbers, the banking system also reduced its bad debts written off by 72.3 percent to P951.87 million compared to what was reported last year of P3.43 billion. Writing off bad debts which are non-performing loans, clears banks’ balance sheets as these are considered uncollectable debts.
With the return of business activities under Alert Level 1 which is a more relaxed Covid-19 mobility restrictions, banks are receiving more borrowers while existing borrowers are gradually building up funds to avoid loan defaults.
Meantime, recovery on charged-off assets also declined by 48.24 percent to P3.59 billion from P6.94 billion in 2021.
As of end-March, banks reported a combined net interest income of P171.22 billion, up six percent from P161.39 billion same time last year. Non-interest income also increased by 8.75 percent to P55.46 billion from P50.99 billion.
As for banks’ operating income, this also improved by 6.73 percent to P226.68 billion compared to P212.39 billion last year.
The BSP said most banks are capable of absorbing losses under scenarios of assumed credit impairment since credit risks are sufficiently funded.
Based on central bank stress tests, local banks’ level of capital and liquidity buffers will enable the industry to cushion the impact of an asynchronous global recovery.
In its most recent Philippine banking sector report, credit watcher S&P Global Ratings said local banks will get back its pre-pandemic profitability levels this year with a recovering economy.
S&P Global has noted that local banks’ return on assets (ROA) is predicted to “edge closer to the pre-pandemic level of 1.2 percent as credit costs continue to moderate.” The positive momentum for economic recovery is one of the main booster for this to happen, it said. Based on BSP data, the latest ROA stood at 1.19 percent.
S&P Global also said that banks’ credit growth will increase by five percent up to seven percent in 2022 which will be supported by the economic recovery and improving business and consumer sentiments. In 2021, credit grew by 4.1 percent.
However, S&P Global also identified three key risks for banks this year, such as new Covid-19 variants which could induce stricter lockdown measures and a faster-than-expected central bank policy normalization.