PNB’s 1H 2012 Net Income Up 144% to PhP1.77B

Pasay–(PHStocks)–Philippine National Bank‘s (PSE: PNB) net profit for the first half of 2012 grew by 144% year-on-year to PhP1.77 billion. The net income figures for the comparative periods are net of the amortization of deferred charges on SPV in compliance to the Bangko Sentral ng Pilipinas (BSP) reportorial requirement to deduct the amortization of deferred losses on SPV against current operations instead of charging them against surplus.

Total operating income grew 34% to PhP8.7 billion compared to PhP6.5 billion in the same period a year ago. Interest income on loans was up 6% owing to improved volume and better spreads coming out of a good mix of corporate, SME and consumer lending. Net loans and receivables grew by PhP5.3 billion during the first half of the year to close at PhP131.5 billion. Trading and investment securities gains expanded 16 times over year-on-year to close PhP2.6 billion, attributed largely to the gain on sale and redemption of available for sale securities. Given its outlook of the market, PNB beefed up its inventory of available-for-sale investments by 13% vs. end-2011. Income from transactional foreign exchange was likewise up 42%.

On the other hand, the deliberate move to focus on generating low-cost funds resulted in an improvement on average cost of funds, thus shoring up net margins by 3% as interest expense went down by 24% compared to the same period last year. PNB launched two bank-wide external deposit campaigns—the “Deposito Manalo” and “Luxury for Free” raffle promotions primarily designed to attract low-cost deposits. These were complemented by an internal deposit fund drive, which mobilized the potential of the entire workforce to solicit new customers and fresh funds. Deposit levels stood firmly at phP223.2 billion. The branch network was also active in cross-selling other product lines such as off-book placements, PNB Mastercard and Visa credit cards, bancassurance, and trust funds. In the second quarter of 2012, PNB launched the PNB High Dividend Fund, the first and only equity unit investment trust fund in the market that seeks dividend income and capital appreciation. The fund generated as much as PhP254 million on its first day of offering.

Operating expenses increased by 20% largely due to merger-related expenses and additional provisions for impairment and credit losses which remain consistent with the conservative provisioning stance of the Bank. Non-performing loans dropped further to PhP66 billion as of the first half of 2012 compared to PhP6.9 billion of year-end 2011. Over the year, PNB further improved its cost-efficiency ratio from 75% to 64%. Pre-tax profits registered twice over the same period last year at PhP2.18 billion.

Consolidated equity was at PhP40.3 billion, up from 3% last year. Subordinated debt increased by PhP3.5 billion, from PhP6.4 billion to PhP9.9 billion. On 9 May 2012, the Bank issued PhP3.5 billion Unsecured Subordinated Notes qualifying as Tier II capital to finance asset growth and strengthen the Bank’s capital base. The PNB Tier 2 Notes generated strong demand prompting the Bank to close the offering earlier than the scheduled end of offer date. This is reflective or investors’ continuing positive credit outlook on PNB. The Bank’s capital adequacy ratio has consistently exceeded the 10% regulatory CAR at 22.4% by mid-year, up from 21.7% in December 2011. Total consolidated resources closed at PhP307.1 billion.

Recently, BSP gave recognition to PNB as the Top Commercial Bank in generating remittance from overseas Filipinos. PNB is already a BSP Hall of Fame Awardee as best commercial bank respondent on overseas Filipino remittances, having received the award for three straight years from 2005-2007. In 2009, the Bank was likewise conferred the Global Excellence Award as the most outstanding remittance bank by the Asia-Pacific Awards Council. For two consecutive years (2010-2011), PNB received the Silver Award for Good Corporate Governance from the Institute of Corporate Directors in recognition of its professional practice of corporate directorship in line with the global principles of good corporate governance. The award was given during ICD’s 9th Annual Dinner last 30 May 2012.

PNB obtained approval on its merger with Allied Banking Corporation (ABC) from PDIC and BSP, and is expecting final approval from SEC and overseas regulatory agencies, after which the merger can finally happen.

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