MANILA, OCTOBER 22, 2003  (STAR) By Zinnia B. Dela Pea  - Philippine National Bank (PNB) sustained its income growth in the first nine months of the year as it posted profits of P127 million, a significant turnaround from the P1.52-billion net loss incurred in the same period last year.

PNB president and chief executive officer Lorenzo V. Tan noted that the bank has stayed on the growth track since January this year, posting net profits monthly.

Tan attributed the improvement in its net income to higher net interest margins and fee-based income, complemented by the favorable reduction in expenses.

Interest income for the nine-month period this year grew by 15 percent to P5.42 billion from only P4.72 billion while interest expense fell to P4.24 billion as against P4.74 billion. Improving cost of funds due to a more favorable deposit mix and better pricing of loans and deposits were mainly responsible for the positive margin during the reference period.

PNB said the introduction of Priority One checking account, which caters to high net-worth clients; the launching of a year-long promotion to encourage overseas Filipino workers and beneficiaries to increase their deposit balances; and a successful deposit campaign among employees to solicit new deposit accounts, contributed in accelerating the growth of low-cost deposits.

As of end-Sept. this year, total deposits amounted to P149 billion or nine percent higher than the end-2002 level.

Fee-based income similarly produced substantial gains for the period under review totaling P3.76 billion, up by 17 percent from the previous years P3.22 billion. The surge in income was due mainly to the adjustment in the pricing of products and services to align these with market, such as those on remittances and deposit products. Other income was further buoyed by recoveries on foreclosed assets.

With higher interest income being complemented by lower interest expenses, PNB was able to positively reverse its net interest margin to P1.17 billion, a significant improvement from 2002s net interest margin of negative P19 million.

PNB said tighter controls in administrative and other operating expenses further boosted its bottomline as remaining expenses declined by eight percent to P4.04 billion in the first three quarters of the year, from P4.4 billion a year earlier.

Tan said low-cost deposits are expected to get a big boost from the recent launching of new, as well as re-packaged deposit products for individuals and corporate depositors.

"More focused approach in the branches delineating roles separately for sales and service has already started to reap positive results as more and more branches improve their individual profitability performance while at the same time significantly improving levels of customer service," Tan said.

Remittance volumes and fees are also expected to deliver a dramatic contribution in the coming months as they will continue to benefit from the tie-ups forged recently with overseas institutions such as 7-Eleven and Bank Madrid in Hong Kong. The tie-up allows OFWs to enjoy the convenience of remitting through any of the 480 7-Eleven stores in Hong Kong 24 hours a day, seven days a week.

Tan said the bank is exploring similar tie-ups in other parts of the world to expand PNBs client base. PNB has just opened new remittance centers in Japan, California and Canada.

Also, he said the bank has focused its efforts on resolving its P75 billion portfolio of non-performing assets through earnest collection efforts and restructuring as well as creative asset management strategies.

The asset management program includes sale of properties through monthly public auctions by the appointed auction manager CB Richard Ellis; tie-up with broker organizations to tap into their nationwide broker network coverage for retail and commercial sales; adoption of measures to add value

to the properties including leasing, caretaker and maintenance arrangements; and the signing up of Ernst & Young as financial advisor for wholesale strategies for the disposition and resolution of ROPOAs as well as NPLs.

Reported by: Sol Jose Vanzi

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