By JIMMY CALAPATI

After four consecutive quarters of contraction, Bank of the Philippine Islands (BPI) yesterday said its first-quarter net income rose 86.1 percent from a year earlier on strong revenues and interest savings.

BPI president Aurelio Montinola III said despite its strong financial results, the bank will continue to be watchful of any adverse turn in the local economy in the months ahead.

"We acknowledge the severity of the present crisis, and that the local economy and the banking industry remain vulnerable to a further deterioration in global economic activity. Signs of stabilization overseas appear tentative and cannot be construed as the beginning of an enduring recovery," Montinola said.

BPI, partly owned by conglomerate Ayala Corp., and Southeast Asia’s biggest bank DBS, said it posted a net income of P2.9 billion in the first quarter.

BPI is the country’s third-largest bank in terms of assets.

The bank said double-digit growth in revenues, net interest income, corporate and consumer loans, and a higher deposit base helped lift its quarterly profits.

Net interest income grew by 22.1 percent, boosted by the expansion in the average asset base, higher yields on loans and lower cost of funds.

The bank said its non-interest income posted a turnaround with a 52.7 percent growth, owing to gains from securities trading.

BPI said it maximized trading opportunities offered by the low interest rate environment.

Corporate and consumer loans registered growth rates of 13.8 percent and 18.9 percent, respectively. Deposits rose by 8.8 percent.

BPI shares climbed 3.95 percent in late morning trade, outperforming Manila’s main index, which gained 2.11 percent.

Last year, BPI net income reached P6.4 billion, down 35.8 percent from 2007.

The bank said this is a direct effect of the global financial turmoil that started last year.

For the fourth quarter of 2008, BPI said it posted profits amounting to P1.1 billion, but this was 26.2 percent lower from the fourth quarter of 2007.

BPI said revenues for the fourth quarter improved by 6.5 percent but were tempered by a 13 percent increase in operating expenses due to the P349 million additional retirement expense following the valuation of the bank’s retirement fund.

With the prevailing uncertainties, BPI said it looks at 2009 with caution and will continue what it started in 2008 — "back to basics" banking.

"We are aware of the challenges posed by the highly uncertain and volatile economic environment on business conditions. But even in these trying times, we intend to do our share to keep the economy going," Montinola said.

He added that they are determined to keep their lending windows open and ensure that customer funds are prudently managed and safeguarded.

"We know that in good times, banking is about growth and earnings. However in difficult times, banking is about liquidity, solvency and trust," Montinola added.

BPI said total resources stood at P667.4 billion at the end of 2008, 4.7 percent higher over 2007.

Deposits likewise improved by 5.2 percent to P540.3 billion.

BPI added that its market capitalization stood at P125 billion, notwithstanding the 24.9 percent drop in the stock price.

Yearend capital was lower at P63.9 billion as actual dividend payments of P8.0 billion exceeded the net income for the year and on lower market valuation of securities.

Overall capital adequacy ratio of 14.1 percent remained sufficient and well above the 10 percent regulatory minimum.

Non-performing loans ratio improved to 2.9 percent, and non-performing assets dropped below 10 percent.

Of the country’s top 10 financial institutions, the BPI posted the highest profits for the third quarter of last year.

However, its P5.32 billion net income was still one-third lower than the P7.64 billion reported during the same period a year ago, as the Ayala-led lender was also affected by the global slowdown.

Aided by the bank’s risk management policies, BPI was the only major bank with no exposure to Lehman Brothers, AIG and the sub-prime mortgage industry.