Bank of Commerce (BankCom), an affiliate of diversified conglomerate San Miguel Corporation (SMC), reported an 11 percent dip in net income to P1.42 billion in the first half of 2024 from P1.59 billion in the same period last year.

In a disclosure to the Philippine Stock Exchange, the bank said earnings were lower due to continued investments in people and technology.

In the first half of 2024, the bank also declared its first dividends in more than 20 years, as committed during its initial public offering. The Bank set aside P0.726 per preferred share and P0.2512 per common share, amounting to 23.37 percent of its previous year's profits.

BankCom reported an eight percent year-on-year growth in total revenues to P5.23 billion for the first semester of 2024. 

Topline revenues were mainly driven by expansion across all lending segments, resulting from a higher loan and securities portfolio. Meanwhile, corporate loans grew on account of program lending and loans to the SMC ecosystem.

BankCom's revenue growth was mainly due to higher net interest income. Net interest income, accounting for over three-fourths of total revenues, grew 15 percent to P4.53 billion compared to P3.95 billion last year. 

Other income decreased by 23 percent to P698.37 million, mainly due to seasonality in fees and commissions, lower foreign exchange and trading gains, and a decrease in gains on real and other properties acquired (ROPA). 

The Investment Banking Group and the Acquired Assets Division did not see the same volume of transactions in the first half of 2024 as the previous year, but the 2024 pipeline remains strong.

The bank remains prudent by setting aside P101.82 million as a provision for credit and impairment losses.

Operating expenses, excluding provision for credit and impairment losses, posted P3.25 billion, 19 percent more than the P2.74 billion last year. Growth in operating expenses was mainly due to the Bank's continued investment in People and Technology. 

The 30 percent growth in Compensation to P1.26 billion was driven by an increase in manpower and an improved retention program. 

Depreciation and amortization (IT-related) amounted to P295.30 million, 34 percent up from last year’s P220.07 million, due to higher depreciation of computer equipment and other properties held. 

Technology modernization activities include a new Core Banking System (a partnership with Infosys) and upgrading the Cash Management and Fraud Management Systems (for safe and secure digital banking).

BankCom said it has continued to invest in its people and in technology, as it aims to sustain its growth momentum over recent years. 

The bank saw strategic hiring and an improved retention program, which increased compensation costs.

Investments in technology geared towards modernization activities include a new Core Banking System (a partnership with Infosys), the upgrade of its Cash Management System, and a new Fraud Management System. 

The Bank believes that sustained investments in these areas will propel it to long-term profit growth.

As of 30 June 2024, total assets amounted to P230.68 billion, translating to a return on assets (ROA) of 1.23 percent.

Total loans and receivables, representing over 50% of total assets, rose 13 percent to P123.71 billion, driven by growth in corporate and consumer loans. The loan growth resulted to a loan-to-deposit ratio of 75 percent. 

Asset quality remained strong with gross non-performing loans (NPL) and net NPL ratios at 1.70 percent and 0.53 percent respectively, from 1.54 percent and 0.44 percent as of end-2023.

Total deposits moderately declined to P177.39 billion, five percent  lower than the previous year with the Bank managing higher cost deposit levels and seeing volatility in its CASA levels given interest rates remaining higher for longer. 

Broken down, total deposits comprised of P155.20 billion CASA, P17.16 billion Time Deposits and P5.03 billion Long-term Negotiable Certificate.