Philippine banks shrugged off the sharp reversal in foreign-exchange trading to post a 2.9 percent increase in net income in the first quarter of the year, driven by higher interest income and the steady expansion in their loan portfolios.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that net profit across the banking sector rose to ₱104.8 billion from ₱101.9 billion in the same period last year.

Banks’ net interest income climbed 12.4 percent to ₱310.6 billion as of March, from ₱276.2 billion in the first quarter of 2025.

This income represents the difference between interest earned and interest expenses, including provisions for losses on accrued interest from financial assets.

Conversely, banks’ non-interest income decreased by nearly one percent to ₱60.1 billion from ₱60.7 billion last year. This category includes fees and commissions, trading income, and foreign exchange (forex) gains or losses.

Non-interest earnings contracted due to the reversal from ₱6.4 billion in forex gains last year to losses of ₱7.7 billion this year.

As of end-March, the banking system’s total operating income climbed by a tenth to ₱370.7 billion, compared with ₱336.9 billion in the first quarter of 2025.

Meanwhile, non-interest expenses increased 8.7 percent to ₱207.7 billion from ₱191.1 billion a year ago. These expenses cover compensation and benefits, taxes and licenses, fees and commissions, as well as impairment losses and provisions.

During the quarter, the banking sector’s total losses on financial assets reached ₱43.5 billion, up 46 percent from ₱29.8 billion in 2025. Provisions for credit losses also surged 36.5 percent to ₱47.6 billion from ₱34.9 billion last year.

Further, bad debts written off reached ₱2.2 billion as of March, more than three-fourths higher than ₱1.2 billion a year earlier. Writing off bad debts such as non-performing or soured loans allows banks to clean up their balance sheets by removing uncollectible accounts.

Recoveries on charged-off assets remained relatively stable at ₱6.4 billion, slightly higher than ₱6.3 billion in 2025.

As of end-March, the banking system’s total assets increased 3.9 percent to ₱30.34 trillion from ₱29.20 trillion in the previous month. Year-on-year, it rose by about a tenth to ₱27.64 trillion.

Bank assets are mainly composed of deposits, loans, and investments, including cash, amounts due from other banks, interbank loans receivable (IBL), and reverse repurchase (RRP) arrangements, net of allowances for credit losses.

During the quarter, the Philippine banking system’s total loan book expanded by nearly four percent to ₱17.26 trillion from ₱16.60 trillion in February. Compared with last year, the total loan portfolio grew by more than a tenth from ₱15.63 trillion.