Bank of the Philippine Islands (PSE: BPI) posted PhP6.07 billion in net income in the fourth quarter of 2018, up 13% from PhP5.37 billion in the same period of 2017, on the back of strong revenues which grew 20.4%. Net interest income rose by 19.4% while non-interest income increased by 22.6%.
Full year net income reached PhP23.08 billion or 3% up versus 2017. Comprehensive income was at PhP21.88 billion. Total revenues increased by 10.6% to PhP78.52 billion, driven by 16.2% growth in net interest income, which reached PhP55.84 billion. The increase in net interest income was a result of a 9% increase in average asset base, and a 21-basis point expansion in net interest margin (NIM). Yield on interest-earning assets improved by 49 basis points, partially offset by a 34-basis point increase in cost of funds, owing to higher documentary stamp taxes, higher time deposit rates, and an increase in other borrowings.
Total loans stood at PhP1.35 trillion, reflecting a 12.7% growth year-on-year, boosted by strong growth in corporate loans and credit card loans at 13.3% and 23.8%, respectively. Total deposits reached PhP1.59 trillion, up by 1.5%, with current and savings accounts (CASA) growing at 2.4%. The bank’s CASA ratio stood at 71.9% while the loan-to-deposit ratio (LDR) was at 85.4%.
The bank registered higher fee income from its transaction-based service charges, credit card and rental businesses. However, lower trust and investment management fees, corporate finance fees, and securities trading income tempered the overall non-interest income results, ending at PhP22.68 billion.
“The capital that we raised in 2018 allowed us to invest in our ongoing digitalization program, and in our high yielding SME, consumer and microfinance businesses,” said BPI President and CEO Cezar P. Consing. “The returns from these investments will become apparent in the coming years. We’re quite excited by what 2019 offers.”
Operating expenses totaled PhP43.6 billion in 2018, an increase of 13.2% year-on-year, across all major categories of manpower, premises, technology, and other operating expenses. Cost-to-Income ratio was 55.5%, up from 54.3% in 2017, reflecting the impact of the Bank’s continued investments in digitalization and the microfinance network. BPI Direct BanKo, BPI’s microfinance arm, doubled its branch count to 200 as of year-end 2018. Provision for losses of PhP4.92 billion was 29.7% higher year-on-year. NPL ratio was 1.85%. The bank’s total loss coverage, including allowances for contingent liabilities, stood at 91.3%.
The Bank’s securities holdings totaled PhP337.47 billion, up by 10.2% year-on-year. About 85% of the securities portfolio was in Hold-to-Collect, and thus less exposed to market volatility.
In 2018, BPI tapped the equity and debt capital markets with landmark issuances, starting with the P50 billion stock rights offering (SRO) in May 2018. This was followed by the issuance of $600 million in senior unsecured bonds in August 2018, and the issuance of PhP25 billion in peso fixed rate bonds in December 2018. The overwhelming success of these fund raising transactions is testament to the strength of the BPI franchise.
At the end of December 2018, the Bank’s total assets stood at PhP2.09 trillion, up by 9.5%, and return on assets (ROA) was 1.2%. Total capital reached PhP248.52 billion, up by 37.5% on account of the SRO. Return on Equity (ROE) was 10.2%, lower by 2.5 percentage points, reflecting the impact of the dilution from the SRO. Capital adequacy ratio (CAR) was at 16.09% and Common Equity Tier 1 Ratio (CET1) was at 15.19%.