Philippine banks generated record earnings in the first half of the year as robust lending margins cushioned the sector against rising credit loss provisions and persistent market volatility.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that net income across the banking system rose 5.2 percent year-on-year to ₱208.4 billion in the six months through June from ₱198.1 billion in the same period last year.

This first-semester performance was buoyed by strong interest income, which offset continued losses in other areas.

Banks’ net interest income climbed 13.1 percent to ₱638.9 billion as of June, up from ₱565 billion in the first half of 2025. This income represents the difference between interest earned and interest expenses, including provisions for losses on accrued interest from financial assets.

Non-interest income saw a modest increase of 2.1 percent, reaching ₱122.2 billion compared to ₱119.7 billion last year. This category includes fees and commissions, trading income, and foreign exchange (forex) gains or losses.

Notably, the industry still reported forex losses of ₱5 billion as of June, but this was a significant improvement from the ₱37.7 billion forex loss recorded in the same period in 2025.

During the first half, the banking system’s total operating income rose 11.2 percent to ₱761.1 billion, compared with ₱684.7 billion a year ago.

During the same period, non-interest expenses increased by a tenth to ₱422.1 billion from ₱384 billion in 2025. These expenses cover compensation and benefits, taxes and licenses, fees and commissions, and impairment losses.

Notably, the banking sector’s total losses on financial assets reached ₱101.7 billion, a 38.2 percent increase from ₱73.6 billion in 2025. Provisions for credit losses also surged 32.2 percent to ₱111.3 billion from ₱84.2 billion last year.

Further, bad debts written off reached ₱4.4 billion as of June, a 61.2 percent jump from ₱2.7 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.

Conversely, recoveries on charged-off assets rose 5.5 percent to ₱14.1 billion, up from ₱13.3 billion in 2025.

As of end-June, the banking system’s total assets increased 2.3 percent to ₱31.13 trillion from ₱30.44 trillion in the previous month. Year-on-year, it rose by more than a tenth from ₱28.21 trillion in June 2025.

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 period, the Philippine banking system’s total loan book expanded by 1.7 percent to ₱17.78 trillion from ₱17.48 trillion in May. Compared with last year, the total loan portfolio grew by nearly 12 percent from ₱15.88 trillion.