BPI Sees Clouded Profit Path as Philippine Credit Costs Surge

Provisions Eat Into Revenue Growth

Bank of the Philippine Islands posted net income of 32.8 billion pesos in the first half of 2026, a marginal 0.4 percent decline from 33 billion pesos a year earlier. The Ayala-led lender saw double-digit revenue growth erased by an 84 percent spike in provisions to 13.3 billion pesos, driven by rising expected credit losses as the Philippine economy softens.

CEO Jose Teodoro Limcaoco told reporters in Manila that the bank's forward-looking credit model demands higher buffers when macroeconomic conditions deteriorate, even when actual non-performing loans remain stable. The provisions reflect worsening expectations rather than immediate loan defaults, he explained.

The contrast with 2025 is stark. Last year BPI enjoyed strong revenues without the provisioning headwind. This year the top line remains robust, but the credit-loss reserves have wiped out most of the operating gains.

Growth Targets Hold Despite Headwinds

Limcaoco said he remains "fairly confident" the bank can deliver low-teens loan growth for the full year. BPI's loan book expanded 12.4 percent to 2.7 trillion pesos by the end of June, and management expects momentum to carry through the second half.

The bank's non-performing loan ratio stood at 2.42 percent in the first half, unchanged from the first quarter. Limcaoco does not anticipate broad deterioration across the portfolio but acknowledged emerging stress in some consumer segments. In response, BPI is tightening credit standards and reinforcing collection efforts.

Operating expenses also climbed, adding to the earnings squeeze. The combination of higher provisions and costs offset what would otherwise have been a strong revenue performance.

Rate Hikes and Inflation on the Radar

Limcaoco expects Bangko Sentral ng Pilipinas to deliver at least one more rate increase this year, potentially in August or October, but doubts a 50-basis-point move in a single meeting. The central bank has already raised rates by 50 basis points in 2026, bringing the policy rate to 4.75 percent after back-to-back 25-basis-point hikes in April and June.

BSP Governor Eli Remolona has signaled openness to a more aggressive stance if inflation risks escalate, though such a move remains unlikely for now. Limcaoco noted that most economists forecast two hikes, but consensus holds for at least one more before year-end.

The bank's economic assumptions align with broader market views. Key variables include the pace of infrastructure spending, inflation trends, and the trajectory of monetary policy. Limcaoco said much depends on whether government capital expenditure accelerates and whether the central bank can manage inflation expectations without choking growth.

What Comes Next

BPI's second-half outlook hinges on factors largely outside its control. If the economy stabilizes, the bank may be able to reduce provisions and let revenue growth flow through to the bottom line. If conditions worsen further, the credit model will require additional buffers, keeping earnings under pressure.

For now, the bank is focused on maintaining loan growth in the low teens while managing credit risk more tightly. Consumer stress bears watching, but the overall portfolio remains within manageable bounds. The next few quarters will test whether BPI's cautious stance proves sufficient or whether the provisioning cycle has further to run.