Philippine Banks Post Record Q2 Earnings Amid Higher Borrowing Costs

MANILA, Philippines — Philippine banks posted their strongest second quarter on record, booking a combined net profit of P208.4 billion as of end-June, up 5 percent from a year earlier. This marks the industry's highest second-quarter earnings haul since comparable records began in 2008, according to preliminary Bangko Sentral ng Pilipinas (BSP) data. The robust performance was largely driven by higher borrowing costs that continued to fatten lending margins. Total operating income climbed 11 percent to P761 billion, with net interest income growing 13 percent to P639 billion. Noninterest income edged up nearly 2 percent to P122.2 billion. Within that segment, fees and commissions rose 7.5 percent to P96 billion, while trading income swung to a P5.7-billion loss from a P47-billion gain a year earlier. Profits on sale of other assets reached P8.5 billion, down by 1 percent. Other income — including dividends and foreign-exchange gains — amounted to P23.6 billion, a reversal from a P24.7-billion loss posted a year earlier on the back of foreign exchange profits. Overall, those revenues more than offset the nearly 10-percent spike in noninterest expenses—like compensation, taxes, impairment losses and provisions — which reached P422 billion. Global debt watchers have warned that Philippine banks could still come under pressure from a prolonged conflict in the Middle East. The war is seen to fuel fresh inflation and force central banks to hike interest rates, slowing credit growth and straining borrowers already grappling with higher fuel and food costs. They also cautioned that a wider regional war could displace Filipino workers in the Gulf, threatening remittance flows that support household spending and domestic consumption. The BSP has already moved to tighten policy in response to the global oil shock tied to the US-Israel war with Iran. The central bank raised its key policy rate by another quarter point to 4.75 percent at its June meeting, bringing the total rate hikes under the current tightening cycle to 50 basis points. Policymakers also said they were “committed to fulfilling its primary mandate of slow inflation and will take necessary actions to ensure inflation returns to its 3-percent target within a reasonable time.” In its report on the Philippine financial system for the second half of 2025, the BSP said banks and nonbank financial institutions had remained in sound condition during the period, leaving the industry well-positioned when the Middle East crisis escalated earlier this year. /atm