Tuesday, 29 December 2009

Listed RP banks stage strong rebound as profits surge 68% in 2009

Erik de la Cruz
Business Mirror

AFTER being shaken by the global financial crisis in 2008, the Philippines’ eight biggest listed banks staged a major turnaround this year with their combined net income growth averaging 68 percent in the first nine months to P29.8 billion, reviving investor interest in the stocks.

Their share prices surged this year, with Security Banking Corp. leading the pack with an increase of 145 percent as of Monday after several dividend declarations and a P2.5-billion stock-rights offer in October.

It’s been another year of surprises for the banking industry and the economy, according to Bankers Association of the Philippines president Aurelio Montinola III.

“Everybody thought 2008 would be a good year and then it turned out bad. And everyone thought 2009 would be bad but it turned out good,” he said in a recent interview.

The Philippines is now widely expected to post a modest growth of 1 percent in gross domestic product this year, one of a few Asian economies that managed to avoid contraction, thanks to the still-growing remittances of Filipinos abroad that fuel consumer spending.

Pascual Garcia III, president of the Chamber of Thrift Banks,  said the pessimists—particularly foreign analysts who early this year mostly predicted a contraction in remittances and the weakening of the peso beyond the level of 50 per US dollar—have been proven wrong.

“Our economy escaped recession and our banks stood strong and healthy amid the global crisis,” he said.

The Philippine banking system has passed the so-called stress tests conducted by the International Monetary Fund (IMF) and the World Bank (WB), according to Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr.

At a recent forum he hosted for the Foreign Correspondents Association of the Philippines, Tetangco said local banks were given a clean bill of health after the tests conducted under the IMF/WB’s Financial Sector Assessment Program.

The banking industry’s nonperforming loans (NPL) were found to be at manageable levels while capital adequacy remained above the minimum regulatory requirement of 10 percent.

Latest data showed the banks’ NPL ratio averaging 3.3 percent in October, the 13th month in a series when the incidence of bad loans averaged lower than 4 percent.

The industry’s average capital-adequacy ratio, an indication of capacity to absorb risks associated with lending, stood at 14.81 percent as of end-June.

With a “significant” improvement in bank profits and the P19.4-billion issuances of Tier 1 capital notes and unsecured subordinated debts qualifying as lower Tier 2 capital by several lenders, the qualifying capital position of the banking system as of end-June was 6.18-percent higher compared with the previous quarter, the BSP said.

Tycoon Henry Sy’s Banco de Oro Unibank (BDO) expects to end 2009 with net income hitting its profit guidance of P5.5 billion, representing a 172-percent increase over last year’s bottom line of P2.2 billion.

BDO—the country’s biggest bank in terms of assets, loans and deposits—posted a 31-percent increase in net income for the first nine months to P22.3 billion and also booked higher fee-based income and bigger trading gains.

Shares in BDO jumped 56 percent to P39 apiece on Monday from its opening level of P25 on January 5, the first trading day in 2009.

Metropolitan Bank & Trust Co. rallied 84 percent to P45 from P24.50. The country’s second-largest bank in terms of assets reported a 24-percent increase in nine-month net income to P4.6 billion, boosted by a 22-percent rise in net interest income.

Ayala-led Bank of the Philippine Islands, the biggest bank by market value, rose 16 percent to P47.50. It booked a net income of P7.3 billion for the first nine months, up 11 percent over profit of P6.6 billion in the same period last year.

Other top gainers include Philippine National Bank, Union Bank of the Philippines, China Banking Corp. and Rizal Commercial Banking Corp.—which all posted improved bottom lines this year.

The best performer, however, was Security Bank with its share price surging 145 percent to P54 from P22.08 on January 5. The lender’s January to September net income jumped 27 percent to P2.2 billion from the same period last year, bringing its annualized return on average equity (ROE)—a measure of profitability—to 21 percent.

Security Bank’s ROE was the industry’s highest.

In its year-end report on the equities market, First Metro Investment Corp. painted a cautious outlook for banks in 2010.

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