Bank of the Philippine Islands (BPI) reported a net income of P2.4 billion in the second quarter 2009, bringing the first semester total to P5.3 billion, 38.4 percent over the previous year.

The bank said it continued to deliver profitable growth in the first six months of the year notwithstanding the country's relatively weak GDP growth rate. BPI’s return on equity and return on assets stood at 16.5 percent and 1.7 percent, respectively.

"We are encouraged by our strong first semester results which should buffer us for a less rosy second half. Loan growth has slackened due to borrower liquidity and cautiousness but we have prudentially added significant credit reserves to prepare for potentially challenging times,” BPI president Aurelio Montinola III said.

Second quarter profits, although 15.9 percent lower than the first quarter 2009, were 6.1 percentthat higher than that of the same period last year.

While net interest spreads were narrower than the previous quarter, net interest income improved by 14.1 percent on a 10.1 percent expansion in average asset base.

Trading income had also fallen by over 50 percent from the previous quarter but was compensated by non-recurring income from asset sales in the second quarter.

The bank also wrote-off the deferred income tax component of a portion of its expiring net operating loss carryover (NOLCO) in the second quarter.

Buoyed by its first quarter performance, first semester revenues were up by 19.2 percent over last year with positive contributions from both net interest and non-interest income.

Net interest income gained 18 percent, boosted by the 7.5 percent growth in average asset base and the 31 basis points increase in net margin. BPI successfully lowered funding costs by 25 bps and kept asset yields stable even amid a declining interest rate environment.

Non interest income likewise increased by 21.1 percent mainly from trading gains and higher service charges and commissions as well as insurance income.

Operating costs were 6.6 percent ahead of the last year on higher manpower and premises expenses. The bank set aside P1.5 billion in impairment losses even as the net 30-day non-performing loan ratio fell to 2.8 percent, bringing reserve cover to 81.1 percent.

BPI remains the largest bank in terms of market capitalization, at P136 billion at end June closing price of P42 per share. With a Basel 2 capital adequacy ratio of 15.2%, the bank declared a P0.90 per share regular cash dividend in June 2009. (JAL)