One Network Bank, the bank with the widest reach in Mindanao, posted a P232 million net income after tax last year, which was seven percent lower than what it earned in 2008. “But its profitability remains higher than most banks,” said Alex V. Buenaventura, president of the bank.
Despite the reduction in income, Buenaventura said the return on investment ratio, which determines the profitability of the investment, remains high at 23%. This indicated “that on the over-all, ONB’s profitability in 2009 was not bad compared with the (average in the) rural banking industry ratio of only 13.66%, said Buenaventura, quoting data from the Bangko Sentral ng Pilipinas.
The return on private investment ratio of the bank, he added, was even higher than the very low ratio of one percent in the commercial banks, he added.
The bank president attributed the lower net income after tax to the minimal growth in loan growth in loan portfolio which was at half a percent, or only P28 million.
Buenaventura explained that the only positive factor in the loan portfolio of the bank was the five percent increase, or P27 million, in the portfolio to the banana industry, and the 21% increase or P145 million, to small businesss.
Its loan portfolio to public school teachers went down by half a percent
or P16 million, while loans extended to local government units (LGUs),
including barangays) went down by half a percent or P128 million.
“Note that the above big portfolio decrease in salary loans to LGUs and
barangays was due to `culling’ of bad loans due to high past due ratio, and this led to the cancellation of credit lines for many LGUs and Barangays and a general risk aversion attitude among branch managers to lend more to remaining accreditted LGUs and barangays,” according to Buenaventura.
The loan to public school teachers had a lower profit after the Department of Education and the bank signed an agreement pegging the interest rate of 12% which took effect in the middle of 2008. At the end of 2009, the bank released about P3.07 billion to the teachers.
The bank was also affected by higher non-performing loan ratio of five
percent last year, compared with only about three percent in the previous
year. This resulted in a “lower relative volume of performing loans for
which interest can be accrued plus higher provisioning for loan loss
reserves (P9 million additional provision booked in 2009) charges against
present operations,” he added.
But its expanded branch network allowed the bank to increase its deposits
“which are mostly cheap funds,” he added, poitning out that last year, the bank operated three new branches to extend its reach to 75 locations in Mindanao. This has made the bank the “widest banking network in Mindanao,” he said.
“The impact of this wider branch network is that ONB was able to increase
deposit liabilities by a big 15% from only P6.01 billion in 2008 to P6.89
billion by end 2009,” he said.
.With bigger deposits, the bank was able to improve its loan to deposit ratio to 85% against 97% in 2009, making the bank “more than self-reliant in terms of funding loans with cheaper own funds versus alternative borrowings which are more costly.
Also, 70% of its deposits are the so-called current and savings accounts
deposits which are lower in cost compared with time deposits, he added.
Last year, Tomas S. Gomez IV, president of the Rural Bankers Association of the Philippines, said that even with a 13% return on private investments, rural banks seemed to be unaffected by the global crisis considering that the rate was high.
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