Banks' profit growth may slow as margins get weighed by rates

BANKS' net income growth could slow for the rest of the year as the Philippine central bank's policy easing cycle put pressure on their margins, according to analysts.

- By Aaron Michael C. Sy

"We should start seeing volume-driven growth this year and we expect earnings to remain strong albeit on a slower growth trajectory as lending rates start to decline," Alfred Benjamin R. Garcia, research head at AP Securities, Inc., said in a Viber message last week.

In the first quarter, the banking industry's combined earnings jumped 10.6% year on year to P101.9 billion as interest and non-interest incomes rose, according to data from the Bangko Sentral ng Pilipinas (BSP).

"Bank earnings were largely in line with expectations, with Metropolitan Bank & Trust Co. (Metrobank) and China Banking Corp. slightly exceeding our forecasts," Mr. Garcia said. "Union Bank of the Philippines, Inc. and Security Bank Corp., on the other hand, missed expectations due to rising costs."