RETAIL BANKING | Cesar Tordesillas, Philippines

BPI first half net income up 38.4%

BPI turned in a net income of US$49 million in the second quarter 2009, bringing the first semester total to US$108 million, 38.4 percent over 2008. Return on equity and return on assets stood at 16.5 percent and 1.7 percent, respectively.Second quarter profits, although 15.9 percent lower than the first quarter 2009, were 6.1 percent higher than the same period last year. While net interest spreads were narrower than the previous quarter, net interest income improved by 14.1 percent on a 10.1 percent expansion in average asset base. Trading income had also fallen by over 50 percent from the previous quarter but was compensated by non-recurring income from asset sales in the second quarter. The bank also wrote-off the deferred income tax component of a portion of its expiring Net Operating Loss Carryover in the second quarter.Buoyed by its first quarter performance, first semester revenues were up by 19.2 percent over last year with positive contributions from both net interest and non-interest income. Net interest income gained 18.0 percent, boosted by the 7.5 percent growth in average asset base and the 31 basis points increase in net margin. BPI successfully lowered funding costs by 25 bps and kept asset yields stable even amid a declining interest rate environment. Non-interest income likewise increased by 21.1 percent mainly from trading gains and higher service charges and commissions as well as insurance income. Operating costs were 6.6 percent ahead of last year on higher manpower and premises expenses. The bank set aside US$30.67 million in impairment losses even as the net 30-day non-performing loan ratio fell to 2.8 percent, bringing reserve cover to 81.1 percent. Total resources at US$14.7 billion expanded 14.8 percent propelled mainly by the 11 percent growth in deposits. Net loans grew at a modest rate of 4.9 percent on softer credit demand from the corporate segment and the US$40.89 million maturities in government promissory notes. BPI remains the largest bank in terms of market capitalization, at US$2.78 billion at end June closing price of US$0.8588 per share. With a Basel 2 capital adequacy ratio of 15.2 percent, the bank declared a US$0.0184 per share regular cash dividend in June 2009. "We are encouraged by our strong first semester results which should buffer us for a less rosy second half. Loan growth has slackened due to borrower liquidity and cautiousness but we have prudentially added significant credit reserves to prepare for potentially challenging times. We recently won a Presidential Citation for Improving Access to Finance, and we are on track with our microfinance initiatives, having obtained BSP approval for the first mobile microfinance bank in the Philippines, in partnership with Globe Telecom and Ayala Corporation," commented BPI president Aurelio Montinola III about their first semester performance.

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