Makati–(PHStocks)–China Banking Corp. (China Bank) (PSE: CHIB) posted an audited consolidated net income of PhP5.009 billion for full year 2011, roughly the same as the PhP5.004 billion posted last year. This result translated to a creditable Return on Equity of 13.72% and a Return on Assets of 2.04%.
Even as network expansion continued full blast, the Bank saw a rapid expansion in its core business with gross loan portfolio growing by 32%, almost three times faster than its average growth for the last decade of 11.2% and outpacing the 19% industry growth. By end of 2011, loans stood at PhP150 billion, with all market segments posting substantial year-on-year growth: corporates at 32%, commercial at 37%, and consumer at 28%.
Amid this substantial expansion, a tighter focus on loans quality led to the drop in non-performing loans, improving China Bank’s NPL ratio to 2.93% in 2011 from 3.89% in 2010. With sufficient provisions for probable losses already in the books, China Bank brought down its loan-loss provisions by 68.7% to PhP155.1 million. Even with this reduction, its loan loss coverage ratio of 143.90% remains among the highest in the industry.
The declining asset yields however, offset the volume growth leading to a flat net interest income. The sustained build up in the Bank’s low cost deposit, checking and savings accounts (CASA) deposits expanding by 13.2% and its share to total peso deposits increasing to 48.7%, kept the interest expense in check. Meanwhile, higher contribution from trust fees, sale of acquired assets and bancassurance business compensated for the lower trading and forex gain.
As the only major bank in full expansion mode for the last five years, the Bank more than doubled its number of branches from 141 in 2006 to 293 by end of 2011 – adding 152 branches so far including the branches from its acquisition of Manila Bank. For 2011, 24 branches were opened, fifteen for the main bank and nine for the savings bank. This is in line with the Bank’s goal of 400 branches by 2014 to ensure growth in market share in the future. The annual operating drag of the branches opened in the last five years is roughly PhP1 billion annually. However, most of the older branches (opened during the expansion period) are already making money and contributing to the bottomline. Despite the expansion, China Bank continued to be one of the most-cost efficient banks in the industry with a cost efficiency ratio of 55.19%.
Total resources improved 1.9% to PhP262.21 billion while total deposits reached PhP216.13 billion. China Bank’s total capital funds reached PhP39.29 billion in 2011, 10.8% more than in 2010. Its financial position remains solid with a Basel II capital adequacy ratio (CAR) of 17.79% and Tier 1 CAR of 16.97%.