Bank of the Philippine Islands: net profit barely grows despite 13.7% rise in net interest income

On March 31, 2026, Bank of the Philippine Islands reported results for the first quarter of 2026. Net interest income rose 13.7% year-on-year to PHP 39.1 billion, but net profit increased only 1.8% to PHP 17.0 billion, weighed down by higher provisions and operating expenses. At the current price, the share looks rather attractive: the P/E multiple of 8.2x is below historical levels, and the portal's model implies upside of +12%.

Key takeaways

— Net interest income rose 13.7% on loan growth and margin expansion

— Provisions jumped to PHP 5.5 billion, eating into interest growth

— Operating expenses rose 15.8%, outpacing revenue growth

— Net profit rose only 1.8% due to provisions and costs

— ROE declined to 14.2% but remains above cost of capital

— P/E of 8.2x is below historical levels; portal's model implies +12% upside

Attractiveness

Key figures, PHP bn

Net interest income rose 13.7% on loan growth and margin expansion

In Q1 2026, net interest income reached PHP 39.1 billion, up 13.7% year-on-year. Growth was driven by an 11.9% increase in average earning assets and a 7 basis point expansion in net interest margin to 4.57%.

Interest income rose 12.3% on higher loan volumes and improved yields on securities, particularly those measured through other comprehensive income. Interest expense increased 9.2% due to higher borrowings and deposit costs, but this was more than offset by faster income growth.

Provisions jumped to PHP 5.5 billion, eating into interest growth

The bank raised impairment provisions to PHP 5.5 billion from PHP 3.0 billion a year earlier. The increase reflects deteriorating asset quality: the non-performing loan ratio stood at 2.42%, up from a year earlier but still below the industry average.

The additional provisions reduced pre-tax profit by roughly PHP 2.5 billion. This is a deliberate choice in favour of conservative risk coverage, but it directly capped profit growth in the quarter.

Operating expenses rose 15.8%, outpacing revenue growth

Operating expenses rose to PHP 23.5 billion from PHP 20.3 billion a year earlier, an increase of 15.8%. The main drivers were compensation and benefits (+8.2%), occupancy and equipment (+14.7%), and other operating expenses (+25.2%).

Cost growth outpaced revenue growth, dragging EBITDA margin down from 65.8% to 59.7%. The bank is investing in digitalisation and network expansion, which temporarily weighs on efficiency but should support long-term growth.

Net profit rose only 1.8% due to provisions and costs

Net profit for Q1 amounted to PHP 17.0 billion, only 1.8% higher than a year earlier. Growth in net interest income was almost entirely offset by higher provisions and operating expenses.

As a result, net profit as a share of net interest income fell from 48.6% to 43.5%. This reflects weaker operating efficiency and higher credit costs, although the absolute level of profit remains high.

ROE declined to 14.2% but remains above cost of capital

Return on equity for the trailing twelve months stood at 14.2%, down from 15.35% in Q1 2025. The decline reflects a larger capital base and moderate profit growth.

Nevertheless, ROE remains above typical cost of capital for emerging markets, supporting investment appeal. The bank maintains a comfortable capital buffer: CAR and CET1 ratios exceed regulatory minimums.

P/E of 8.2x is below historical levels; portal's model implies +12% upside

The current P/E multiple is 8.2x based on trailing twelve-month earnings. This is well below the three-year average, suggesting the stock is undervalued relative to its own history.

Our portal's model implies upside of +12% to fair value. The trailing twelve-month dividend yield is 4.6%, providing additional support to shareholders.

Valuation on the latest reported figures

Bottom line

In Q1 2026, Bank of the Philippine Islands delivered solid growth in net interest income, but net profit rose only 1.8% due to higher provisions and operating expenses. The provision increase reflects prudent risk management, while cost growth stems from investments in future development. At a P/E of 8.2x and a dividend yield of 4.6%, the share looks rather attractive, especially given the +12% upside on the portal's model. The key question for holders is whether the bank can stabilise asset quality and slow expense growth so that profit can again grow in line with revenue.