China Banking Corporation (China Bank) registered a 10% growth in net profits in the first half of 2017 to P3.6 billion, driven by strong growth in its lending business and core-recurring income. This translates to a return on equity (ROE) and return on assets (ROA) of 10.44% and 1.13%, respectively.
Net interest revenues grew 16% year-on-year to P9.2 billion, while non-interest revenues went up 6% to P3.1 billion as a drop in trading gains were offset by the growth in service charges, fees from bancassurance, investment banking and trust, as well as income from asset sales. Excluding trading gains and one-off items, operating income grew 18% compared to last year, reflecting continued robust growth in earnings from core businesses.
“The results for the first half of the year is an encouraging indication of China Bank team’s ability to execute on our strategic direction of strengthening our core businesses while achieving revenue diversification, ” China Bank President and CEO Ricardo R. Chua said. “The network expansion started 10 years ago continues apace, while the substantial investments in recent acquisitions and subsequent integration are starting to bear fruit.”
Gross loans portfolio grew faster than industry by 22% to P401.7 billion, as all segments showed robust growth. Consumer loans grew 25% in both the parent bank and the savings bank subsidiary while commercial loans grew a healthy 10%. Loans to the corporate segment also rose by a better-than-expected 25% as the bilateral loans generated by the Institutional Banking Group were boosted by bookings arising from deals generated by China Bank Capital, which has continued to reinforce its presence in the corporate market.
Even as the loans book showed healthy growth, asset quality continued to improve in both absolute amounts and NPL ratios of 1.81% better than the industry average of 1.94%. Consolidated NPL coverage ratio also continued to improve to 92.8%, with the parent bank ratio better than industry average at 155.6%.
Total assets reached P657.5 billion, up 18% year-on-year as the bank’s customer base and market share grew with the expansion of its branch network. China Bank has 563 branches to date, more than triple its branch network in 2006, of which 156 are branches of China Bank Savings. The savings bank's branch network alone is now bigger than the 148 branches of China Bank before its expansion phase triggered by the acquisition of Manila Bank in 2007. Total securities grew by 39% to P109 billion, mainly in the HTM portfolio with minimal mark-to-market risk in a rising interest rate scenario.
The growth in asset base was funded by a 20% growth in total deposits to P554.0 billion, supported by a 19% growth in low-cost checking and savings deposits. The maturity mix of the funding base was further rationalized with the P15.9 billion LTNCDs issued in November 2016 and June 2017, and providing investors with longer term investment and better yields.
Operating expenses grew 12% to P7.5 billion with the continued expansion in branch and distribution network and investments in people and technology to support the growth of new businesses. Cost-to-income ratio was at 60.91%, an improvement from the 61.37% recorded in the first half of 2016.
In addition, the P15.0 billion additional capital raised via stock rights offer (SRO) in May 2017, increased total equity to P80.1 billion, boosting capital ratios to 14.65% CET 1 and 15.5% Total CAR.
“We have raised our capital funds to support robust growth in all businesses in the next few years,” China Bank EVP and Chief Operating Officer William C. Whang added. “We will continue to build our fee-based businesses while pursuing growth in market share. We are happy to see steady progress in the high-growth and better-yielding consumer market.”
Following the completion of the SRO, China Bank received an investment grade credit rating of Baa2 from Moody’s Investors Service—the same level as the Philippine sovereign rating and at par with the country’s top three biggest banks. Another international credit rating agency, Fitch Ratings, affirmed the Bank’s Long-Term Issuer Default Rating at ‘BB+’ and its Viability Rating at ‘bb+’ with Stable outlook early this year, following an upgrade in 2016.
Recently, the Bank paid off one year ahead of schedule the three-year US$158 million Syndicated Loan originally scheduled to mature in June 2018, as favorable market conditions helped the strong growth in its foreign currency deposits .
China Bank won Best Core Banking Implementation (Mid-sized Banks category) at the Technology Innovation Awards 2017 presented by The Asian Banker for its smooth migration to a new core banking system that significantly improved its efficiency and client service experience. The Bank also bagged three awards at The 7th Asian Excellence Awards 2017 presented by Corporate Governance Asia, namely Asia's Best CEO - Investor Relations for Chua, Best Investor Relations Company (Philippines), and Best Investor Relations Professional (Philippines) for SVP Alexander C. Escucha.
Founded in 1920, China Bank is one of the largest private universal banks in the Philippines providing a full range of banking products and services to corporate, commercial, and retail customers through 552 branches to date. It also offers bancassurance and insurance brokerage services through its subsidiaries China Bank Manulife Life Assurance Corporation (MCBLife) and China Bank Capital Corp., respectively, and a range banking products and services for the retail and SME (small and medium enterprises) markets through China Bank Savings.
Re-disseminated by The Asian Banker