By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINE banking system’s net profit jumped by 6.6% at end-September as both net interest and non-interest income grew, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The combined net income of the banking industry rose to P290 billion in the first nine months of 2024 from P272.6 billion in the same period a year ago.

Banks’ net interest income climbed by 14% year on year to P767 billion as of September  from P672.5 billion. Broken down, interest income increased by 18% to P1.11 trillion from P940.6 billion, while interest expense jumped by 28.1% to P343 billion from P267.6 billion.

Meanwhile, the sector’s non-interest income went up by 2.3% to P171.9 billion in the period from P168 billion.

This came as earnings from fees and commissions rose by 12.6% to P118.6 billion from P105.3 billion. Trading income stood at P18.9 billion, higher by 9.5% from P17.2 billion in the year-ago period.

Lenders’ non-interest expenses jumped by 10.8% to P521.5 billion from P470.8 billion.

Meanwhile, the industry’s losses on financial assets widened by 27.7% to P76.2 billion in the nine-month period from the P59.7-billion shortfall a year prior.

Provisions for credit losses grew by 27.8% to P85.7 billion from P67.1 billion, while bad debts written off surged by 395% to P2.29 billion from P462.7 million.

“The banks generally met our expectations for earnings in the first nine months. We’re still seeing some tailwinds from the high interest rate environment, which kept net interest margins for banks at a robust level,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said.

However, Mr. Garcia noted that the decline in borrowing costs may make it difficult for banks to keep margins at current levels.

Since August, the central bank has so far reduced the target reverse repurchase rate by a total of 50 basis points to 6%.

The Monetary Board is scheduled to have its final policy review this year on Dec. 19.

“We might see some positive effects from the BSP’s RRR (reserve requirement ratio) cut, but this is still subject to the presence of demand for loans, otherwise it will just be excess liquidity for the banks,” Mr. Garcia said.

“They might be able to deploy this excess liquidity in the following quarters as rates decline further thus boosting demand for loans,” he added.

Effective Oct. 25, the BSP reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5%.

BSP Governor Eli M. Remolona, Jr. has said the BSP is eyeing to slash big banks’ reserve requirements to as low as zero before his term ends in 2029.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the continued growth in the industry’s earnings may be driven by the double-digit expansion in lending.

Earlier data from the BSP showed bank lending jumped by 11% year on year to P12.4 trillion in September from P11.17 trillion a year ago. This was also the fastest growth since the 13.7% posted in December 2022.

“Thus, continued growth in net income led to higher capitalization of banks that enabled banks to increase lending and other investment activities, thereby leading to continued growth in banks’ resources,” Mr. Ricafort added.

TOTAL ASSETSMeanwhile, the banking industry’s total assets climbed by 11.4% year on year to P26.7 trillion at end-September from P24 trillion a year ago, separate data from the BSP showed.

Banks’ assets are mainly supported by deposits, loans, and investments. These include cash and due from banks as well as interbank loans receivable (IBL) and reverse repurchase (RRP), net of allowances for credit losses.

The banking sector’s total loan portfolio inclusive of IBL and RRP jumped by 14.4% to P14.4 trillion as of end-September from P12.6 trillion in the previous year.

Net investments, or financial assets and equity investments in subsidiaries, increased by 11.9% to P7.7 trillion from P6.9 trillion a year ago.

Cash and due from banks stood at P2.4 trillion, lower by 13.6% from P2.8 trillion a year earlier.

Net real and other properties acquired rose by 6.9% to P112 billion from P104.8 billion a year ago.

Banks’ other assets surged by 30% to P2 trillion from P1.56 trillion a year earlier.

Meanwhile, the total liabilities of the banking system grew by 11.3% to P23.4 trillion from P21 trillion in the year-ago period.