Philippine banks turned more profitable in the first quarter, reaping almost three percent higher earnings to P92 billion due to higher net interest income.

Preliminary data from the central bank showed the industry's total operating income rose by 10.2 percent to P300.39 billion as net interest income grew by 16.4 percent to P247.41 billion.

Interest earnings jumped by 21.9 percent to P356.43 billion, while interest expenses climbed by 36.7 percent to P108.86 billion.

The Bangko Sentral ng Pilipinas had raised key policy rates by a cumulative 450 basis points from May 2022 to October 2023 to bring the benchmark interest rate to a 17-year high of 6.50 percent, from an all-time low of two percent, to tame inflation and stabilize the peso.

Amid the slower-than-expected inflation print and stable economic growth, the central bank extended its prudent pause as it kept interest rates on hold in February and April. It is likely to be kept unchanged on Thursday when the policy-setting Monetary Board holds its scheduled meeting.

On the other hand, non-interest income of banks operating in the Philippines slipped by 11.7 percent to P52.98 billion in the first quarter due to the 66.2-percent drop in the earnings from the sale of other assets to P3.52 billion, as well as the 69-percent decline in trading income to P1.49 billion.

Earnings from fees and commission booked an 8.9-percent increase to P37.42 billion in the first quarter.

Data also showed that the industry's provision for credit losses on loans and other financial assets was higher by 29.4 percent to P25.11 billion, while soured loans written off stood at P725.96 million, almost six times larger from P139.311 billion.

Last year, banks' earnings jumped by 12.9 percent to hit an all-time high of P35 billion from P310.12 billion in 2022.

Latest data also showed that the share of bad debts to the banking sector's total loan book went down to 3.39 percent in March from 3.44 percent in February. It marked the lowest in three months or since the 3.24 percent recorded in December 2023.

Soured loans went down by 0.3 percent to P464.67 billion in March from P466.11 billion in February. Year on year, bad debts rose by 11.9 percent from P414.98 billion.

Lenders' total loan portfolio expanded by 9.8 percent year on year to P13.69 trillion as of March.

At the end of 2023, the industry's NPL ratio was at 3.24 percent, higher than the 3.16 percent as of end-2022. The ratio peaked at 4.51 percent in July and August 2021, at the height of the COVID-19 pandemic.

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