MANILA, Philippines — Philippine banks delivered a record-breaking performance in the first quarter of the year, with profits climbing despite heightened volatility in global markets brought about by tensions in the Middle East.
Data released by the Bangko Sentral ng Pilipinas showed that the country’s banking industry booked a combined net income of P104.82 billion from January to March, up nearly 3 percent from the same period last year.
The figure marked the sector’s strongest first-quarter earnings since comparable records began in 2008.
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The banking sector’s growth was largely fueled by higher interest earnings. Net interest income — the difference between what banks earn from loans and pay on deposits — rose 12.44 percent to P310.59 billion as elevated borrowing costs continued to support lending margins.
Meanwhile, noninterest income remained relatively steady at P60.1 billion.
Revenue from fees and commissions increased by close to 7 percent to P47.62 billion, while trading operations rebounded sharply, posting a P6.22-billion gain compared to a P1.17-billion loss recorded a year earlier.
However, other income sources, including dividend collections and foreign exchange earnings, fell dramatically by 93.6 percent to just P822 million. The decline was largely attributed to a P7.7-billion foreign exchange loss.
Despite the drop in other income, banks were still able to offset rising operating costs.
Noninterest expenses, which include salaries, taxes, impairment charges, and provisions for possible losses, climbed 8.7 percent to P207.73 billion during the quarter.
Still, analysts and global credit observers warned that Philippine lenders may face mounting risks if conflict in the Middle East drags on.
A prolonged war in the region could trigger renewed inflationary pressures by driving up global oil prices, potentially forcing central banks to keep interest rates elevated for longer.
Higher borrowing costs could eventually weaken credit demand and place additional strain on consumers and businesses already dealing with rising fuel and food expenses.
Observers also flagged possible risks to remittance flows if a broader regional conflict displaces overseas Filipino workers in Gulf countries.
Remittances remain a major driver of household spending and domestic economic activity.
In response to oil-related inflation concerns linked to the ongoing US-Israel-Iran conflict, the Bangko Sentral ng Pilipinas earlier raised its benchmark interest rate by 25 basis points to 4.5 percent during its April 23 policy meeting.
At the time, monetary authorities acknowledged a “deteriorating” inflation outlook and reiterated their commitment to keeping inflation within the government’s target range.
“The BSP remains committed to fulfilling its primary mandate of maintaining price stability and will take necessary actions to ensure inflation returns to target within a reasonable time,” policymakers said.
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