Banks lift profit to P104.8 billion in Q1

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May 19, 2026 | 12:00am

MANILA, Philippines — Philippine banks remained profitable in the first quarter, with combined net income rising by 2.9 percent to P104.82 billion from P101.9 billion a year ago, driven largely by stronger lending income and expanding asset bases despite higher provisions for potential loan losses.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s total operating income increased by 10 percent to P370.7 billion in the January-to-March period from P336.9 billion a year earlier.

The growth in operating income was fueled mainly by a 12.4-percent increase in net interest income to P310.59 billion from P276.23 billion.

Interest earnings climbed by 7.9 percent to P427.41 billion from P395.99 billion as banks continued to benefit from elevated lending rates and sustained credit expansion, while interest expenses slipped by 2.7 percent to P116.05 billion from P119.32 billion.

The increase in net interest income came even as the BSP had already reduced benchmark interest rates by a cumulative 225 basis points from August 2024 to February this year, suggesting that banks continued to benefit from loan repricing and expanding loan volumes while deposit costs adjusted more gradually.

During the first quarter, the BSP maintained a relatively accommodative stance following the aggressive easing cycle that started in 2024. But inflation pressures later resurfaced due to higher oil prices and supply-side risks, which prompted the central bank to hike rates by 25 basis points in April.

The BSP is widely expected to raise interest rates further this year amid rising inflation. Higher interest rates typically support banks’ margins by allowing lenders to reprice loans faster than deposits, boosting profitability.

However, a prolonged high-rate environment could also weaken borrowers’ repayment capacity and lead to higher credit costs. Signs of mounting asset quality risks were reflected in banks’ provisions for possible losses.

BSP data showed that provisions for credit losses on loans and other financial assets rose by 36.5 percent to P47.64 billion from P34.89 billion a year earlier.

Likewise, soured loans written off by banks surged by 77.6 percent to P2.22 billion from P1.25 billion, indicating that lenders continued to clean up balance sheets amid pockets of financial stress among borrowers.

Despite this, the banking sector’s balance sheet continued to expand as the industry’s total assets grew by 9.9 percent to P30.34 trillion as of end-March from P27.6 trillion in the same period last year.

Banks’ resources include deposits, capital, bonds and other debt instruments, as well as financial and non-financial assets.