Good afternoon, ladies and gentlemen. Welcome to our earnings call to discuss BPI's results for the third quarter and nine months of 2025. I'm Haj Narvaez, your moderator for this session. We are conducting this briefing in a hybrid manner with our BPI speakers and panelists here in our headquarters at Tower Two of Ayala Triangle Gardens, Makati City. We also have the rest of our participants dialing in remotely. I am pleased to introduce you to our speakers and panelists this afternoon. First, TG Limcaoco, President and CEO. Eric Luchangco, CFO and CSO. They will be joined in the panel for the Q&A by Tere Marcial, Head of BPI Wealth. Ginbee Go, Head of Consumer Banking. Luis Cruz, Head of Institutional Banking. Jenny Lacerna, Head of Mass Retail Products.
Dino Gasmen, treasurer and head of Global Markets, is unable to join us today, but representing him and the group will be Jethro Sorra. We are also joined by the rest of the BPI leadership team in this call. Moving on. This afternoon's agenda will begin with opening remarks from our President and CEO, TG Limcaoco, followed by our CFO and CSO, Eric Luchangco, who will walk you through the third quarter and nine months' performance highlights, as well as the digitalization updates. The floor will then be open to questions from the audience. Please note that this call is being recorded and legal disclaimers apply. Now, let me turn you over to TG for his opening remarks.
Thank you very much, Haj, and a nice afternoon to all of you, and thank you for joining us this afternoon. As we reported last October 16, our financial results remain robust, demonstrating that our strategy of broadening our client base, growing the share of our non-institutional loans in our loan book, investing in our distribution channels and technology that of our phygital branches, our digital platforms, and our unique agency partners now with close to 7,000 stores, which all allow us to serve more customers more efficiently and delivering service that is truly customer obsessed. All these are delivering results as we expected. Nine-month net income of PHP 50.5 billion, that's up 5.2% versus last year, which delivered an ROE of 15% and a return on assets of 2%.
Our net income was driven by strong revenue growth of 13.2% and managed operating expenses, which grew 10.3%. Our net interest income, which comprises about 77% of total revenues, grew 16.2% as a result of loan growth that was over 13% and NIM expansion of around 30 basis points. All these numbers, our CFO, Eric Luchangco, will restate with more detail, along with details on our balance sheet growth. The analyst community has expressed some concern on NPL and provisions, not only at BPI, but for the industry as a whole. Eric and the team will walk through some of the numbers that should evidence that our strategy of expanding our consumer book, which is the reason for the slightly higher NPL numbers, is truly paying off.
The team present today would be more than happy to give more details on these, as well as our policy on provisioning, which follows the output of our expected credit losses, of our expected credit loss models, which we believe are forward-looking and are independently vetted and verified by third parties. We would also be more than happy, of course, to provide you with our outlook on these markets going forward. Finally, Eric will provide what I call snippet updates on our digital initiatives, including that of the use of AI in our first project, the breadth of our agency banking rollout, and our expansion of our Wealth Business. Again, thank you for joining this afternoon, and allow me to turn the floor over to our CFO, Eric Luchangco.
Okay. Thank you, TG, and good afternoon, too, and thank you to everybody joining us today on our third quarter earnings call. As usual, I'll start off with an update on our financial performance, to be followed by some updates on key initiatives of the bank, and then move on to taking some questions as part of a panel. This quarter's results extended the pattern of growth from previous periods, highlighted by the following. For the first nine months, the bank generated record income of PHP 50.5 billion, up 5.2% from the prior year, driven by revenue growth. The bank also generated a record quarter income of PHP 17.5 billion, up 7.4% quarter-on-quarter, largely driven by loan expansion in the non-institutional segment.
Indicative return on equity stood at 15% and return on assets at 2%. The balance sheet continued to expand, with loans up 13.3% year-on-year and 1.8% quarter-on-quarter, while deposits were up 7.7% year-on-year and 2.5% quarter-on-quarter. Liquidity ratios remained robust, while the capital position further strengthened from strong income generation with the CET1 ratio at 14.9% and CAR at 15.8%. With the NPL ratio at 2.3% and NPL cover at 96.5%, credit quality remains under control and favorable versus industry averages. We delivered earnings per share of PHP 9.55 p er share for the first nine months, and we are on track to pay improved dividends for the second half.
Net income reached PHP 50.5 billion for the first nine months, up 5.2% year-on-year, driven by strong revenue growth that offset higher operating expenses and provisions. Net interest income rose 16.2% year-on-year to PHP 109.1 billion, driven by a 13.3% loan growth and a 27 basis point increase in NIM. Trading income increased 13.5% to PH 3.38 billion against a backdrop of declining interest rates. Fee income was up 6.5% to PHP 28.1 billion, reflecting transaction activity growth. Total revenues reached PHP 142.3 billion, up 13.2% year-on-year, sustaining the positive job versus the 10.3% rise in OpEx to PHP 65.5 billion.
Provisions were up 145% from last year, reaching PHP 11.75 billion, tempering net income growth to 5.2%, at PHP 50.5 billion. Looking at it on the per quarter basis, net income reached PHP 17.5 billion, up 7.4% quarter-on-quarter. Total revenue rose to PHP 49.8 billion, up 4% from the previous quarter, driven by net interest income of PHP 37.9 billion, up 3.2% quarter-on-quarter, despite a slight decline in NIM for the period. This growth underscores the continued momentum in non-institutional loans, which offset the flattest performance for institutional loan volume for the quarter.
Fee income of PHP 9.55 billion, up 2.8% quarter-on-quarter, and trading income of PHP 1.8 billion, up 50.5% quarter-on-quarter. Moving on to the next, for the first nine months of the year. If we can move on to the next slide. For the first nine months of the year, earnings per share reached PHP 9.55 per share, reflecting a 5.2% year-on-year increase. Profitability remains strong with an annualized return on assets of 2%. Return on equity remains solid at 15%, demonstrating sustained value creation for shareholders. Moving on to the balance sheet.
Total assets reached PHP 3.5 trillion, reflecting a 9.3% year-on-year increase. Loan portfolio expanded to PHP 2.4 trillion, up 13.3% year-on-year and 1.8% quarter-on-quarter, driven by sustained credit demand across segments. The deposit base expanded 7.7% year-on-year, primarily fueled by growth in time deposits. Both loan and deposit growth outpaced industry averages, contributing to further gains in market share. The CASA ratio was at 61%, while the loan to deposit ratio stood at 90%, reflecting efficient funding utilization. Managed deposit growth combined with a 450 basis point cumulative reduction in the reserve requirement ratio since October of last year supported liquidity and lending capacity. The loan book grew 13.3% to PHP 2.4 trillion, indicating continued positive momentum.
Notably, the non-institutional segment now accounts for 30.8% of the total loan book. This puts us about one year ahead of the 2021 plan to hit a 30% ratio by year-end 2026. Net interest margin for the quarter was 4.62%, easing 5 basis points quarter-on-quarter, the first quarterly decline since the rate cuts in October last year. During the quarter, asset yield rose by 1 basis point as the positive impact of higher loan volume and an 11 basis point increase in loan yields was offset by lower yields from investment securities. As shown by the red line on the right-hand chart, loan yield actually continued to increase, reaching 8.16%.
Meanwhile, cost of funds rose 6 basis points quarter-over-quarter, driven by an increase in time deposit volume, which outweighed the benefit of lower lower TD rates and other borrowing rates. Overall, credit demand remained resilient and BPI's growth continued to outpace industry. Gross loans increased by PHP 283.3 billion or 13.3% year-over-year. Non-institutional loans accounted for over half of that growth, rising PHP 159.4 billion or 27.2% year-over-year. The growth in non-institutional loans was led by business bank loans up 72.3%, personal loans up 31.4%, credit card loans up 30.6%, auto loans up 28.7%, mortgage loans up 19%, and microfinance loans up 16.8%.
These reflect robust growth momentum, especially considering the higher base following successive years of strong growth. On funding, we continue to optimize our funding sources by shifting from time deposits to bond issuances, leveraging incentives under BSP Circular 1185 for Green and Sustainable Financing. This approach offers a lower effective yield compared to that of top rate time deposits. While deposits remain our primary funding source, we saw a 34% increase in borrowed funds, which now account for 7% of total funding. Funding ratios remain stable, with loan- to- deposit ratio at 90.3% and loan- to- total funding at 83.7%. We continue to prioritize strengthening our deposit base with focus on CASA. Our CASA mix remains predominantly retail, comprising 77% of the total, including contributions from microfinance and SMEs.
Growth in CASA is being driven by the core mass market and mid-market, reflecting client base expansion and higher average balances. Asset quality. On asset quality, credit quality remains manageable despite expansion into higher yielding segments. NPLs rose PHP 55.01 billion, and the NPL ratio remained broadly stable at 2.29% as the new rate of NPL formation slowed. Provisions reached PHP 4.5 billion for the quarter, bringing year-to-date credit cost to 68 basis points. NPL coverage remains adequate at 96.5% and further strengthened to 122.3% under BSP Circular 941, ensuring a solid buffer against potential credit losses. Across segments, the institutional business bank, mortgage, microfinance, and auto loan segments posted declines in their respective NPL ratios.
Personal loans NPL ratio rose by 123 basis points quarter-on-quarter to 7%, while credit cards increased by 32 basis points to 4.65%. The increase in personal loans NPL is primarily from the universe expansion initiative, which included lowering the income requirement in 2023. To mitigate further delinquencies, we tightened the credit score cutoff starting May 2025, and this adjustment has proved effective as accounts both post-tightening show a lower NPL ratio of 5.5% four months after booking. Teachers loans, which account for 33% of personal loans, also contributed to the delinquencies, even though 28% of the loans classified as NPL are still paying regularly due to a system implementation under DepEd rules.
Excluding these technical NPLs, the adjusted NPL for personal loans would improve to 6.6%. The increase in credit card loans is 55% from depositor programs and 45% from regular programs, covering mostly younger segments, lower income, and new to credit. Similar to PL, we tightened the credit score requirements starting August and will only be able to measure the impact after six months. Microfinance NPL ratio rose by 250 basis points year-on-year, reaching 13% due to the test program that granted higher loan amounts to existing clients and extending loan tenors. However, recent bookings have shown improved performance following the tightening of credit score requirements.
Business banking NPL ratio remains stable quarter-on-quarter, up 180 basis points year-on-year, primarily due to the strong loan growth last year. BB loan balances doubled in 2024, which suppressed the NPL ratio. With the recent tapering in loan growth, the NPL ratio has now adjusted to the 7%-8% range, which reflect more normalized levels for business banking. In addition to NPL coverage, we report ECL coverage at 102.5%. As shared during our previous earnings call, our provisioning approach is anchored on ECL, which provides a forward-looking estimate of potential losses. The shift from an NPL-based approach is driven by two key considerations. One is provisioning against NPL is reactive as it occurs after loans have become NPL. Two, under PFRS 9, we're required to maintain reserves that adequately cover the ECL.
Additionally, we maintain surplus reserves for performing loans through the GLLP or General Loan Loss Provision. Together, these provisions reflect a prudent and forward-looking credit risk strategy, ensuring our financial statements present a realistic view of expected losses. Moving on to fee income. Fee income for the quarter reached PHP 9.55 billion, up 2.8% quarter-on-quarter and 1.7% from last year, driven by continued growth in core businesses. Card fees surged 17.3% on a 21% increase in billings, 17% increase in transaction count, and 3% increase in average ticket size, supported by a growing card base, which increased 7%. Wealth management fees grew 7.5%, with AUM reaching PHP 1.8 trillion.
88% of the increase came from client contributions, reinforcing our market leadership in trust assets and mutual funds, where we continue to gain market share. Income from the insurance business rose just 1.5%, primarily due to a decline in equity income of our insurance subsidiaries, given challenging market conditions. Excluding this impact, insurance fee income grew 6.8% year-on-year. These gains were partly offset by lower fees on retail loans due to outsized housing loan penalties charged last year. Remittance fees declined due to lower transaction count amid increasing competition. Bank service charges dropped as clients continued to shift from branch transactions to online channels. Digital channel fees also declined despite a 10% increase in API partner volumes, mainly due to the termination of e-wallet loading services to GCash and Maya.
Operating expenses rose by 1.7% quarter-on-quarter and 7.9% year-on-year, primarily driven by manpower, premises, and other expenses, which includes marketing, rewards, business volume-related expenses, and third-party fees. These investments have strengthened the bank's position. We added nearly 2 million new customers since the start of the year, bringing our total customer count to 17.8 million. We achieved strong volume growth across the bank and gained market share in key areas including loans, deposits, and wealth management. We achieved operational efficiencies with the cost-income ratio continuing its steady decline. Although we expect expenses to show the usual spike in the fourth quarter, our cost-income ratio is currently trending close to a percentage point lower than last year. Moving on to capital.
Our CET1 capital reached PHP 402 billion, driven by strong income accretion despite the June dividend payment. The capital position remains robust, with indicative CET1 at 14.9% and CAR at 15.7%, both well above regulatory and internal thresholds, providing ample capacity to support continued loan growth and strategic expansion. Loan growth at 13.3% year-on-year versus RWA growth of only 7% was due to the application of fill ratings for some eligible issuers and corporates, lowering their risk weights from 100% to between 20%-50%. The CET1 ratio is estimated to close the year at 14.7%.
This table shows the revenues associated with loans covering the first nine months of 2025 and the first nine months of 2023, and the respective net NPL formation for each loan book for the two periods. From 2023 to 2025, revenues across the loan books increased by PHP 30.9 billion, which is nearly four times higher than the PHP 7.75 billion increase in net NPL formation. The non-institutional segment contributed PHP 25.1 billion in revenues, surpassing the PHP 13 billion increase in net NPL formation, a pattern observed consistently across all loan segments. The total revenue uplift is driven by the sharp growth in non-institutional volume, which in turn drove the shift in loan mix toward higher yielding segments and the increase in fee income associated with higher loan volume. Revenues have outpaced the cost.
Despite the rise in provisions, the pivot toward non-institutional loans has delivered value and validates the bank's direction to grow the share of non-institutional portfolio in the loan mix. While institutional loans are and will remain a core part of our portfolio, non-institutional loans have proven to be a segment with greater growth opportunity, consistently delivering loan yields above 12%, twice that of institutional loans. Even after factoring in credit cost or net NPL formation, which are both around 3%, non-institutional loans continue to show greater risk-Adjusted returns. Non-institutional loan growth has outpaced institutional loan growth, contributing to the uplift in overall profitability as there is greater availability of untapped opportunity in that market.
Within the unsecured space of our non-institutional loans, a substantial share of our loan releases has been directed toward existing clients, leveraging insights drawn from their customer profiles, transaction history, and cash flow patterns. In credit cards, 81% of new clients onboarded in the first seven months of the year were already BPI clients. For microfinance and personal loans, year-to-date loan releases also show strong bias toward existing clients, with 69% for microfinance loans and 74% for personal loans. This data-driven strategy prioritizes existing clients with stronger financial behavior, thereby enhancing credit quality while supporting loan expansion. The bank achieved strong loan expansion through lending programs. Programs with clearly defined parameters to test the viability of new credit models, borrower segments, or loan products prior to a full-scale rollout. Here we provide a glimpse of how we structure our lending programs.
Each program has a dedicated budget which has ranged from PHP 300 million to PHP 3 billion, with an expected level of delinquencies aligned to the risk profile. These initiatives are data-driven, leveraging extensive historical client data. Since the launch, 54 programs have been conducted, of which 24 have been regularized or fully implemented, 17 have been decommissioned, while 13 are still ongoing. The impact is significant. Regularized programs now account for 16% of the outstanding non-institutional loans. This approach supports the bank's long-term growth strategy. Rather than focusing solely on short-term asset quality metrics, we prioritize sustainable portfolio expansion. As the portfolio continues to grow, the relative impact of NPLs from these lending programs is expected to lessen over time, given the smaller relative size of a lending program to the overall book.
As part of our commitment to digital leadership, the bank continues to operate 7 client engagement platforms with steady growth in enrolled and active users, as shown at the bottom of the table. Transaction volume is increasingly shifting to digital channels, driven by our efforts to expand partnerships, introduce new functionalities, and enhance the overall customer experience. The newly launched features for each platform are highlighted at the top of this slide. As of October 2025, we now have 136 API partners, up from 74 in 2019, and offer more than 17,000 brands, up from only 749 in 2019. Delving into the BPI app. From 2023 to 2025, the new BPI app has evolved from offering basic services to delivering comprehensive digital banking solutions that allow clients to move, protect, and grow their money.
Key enhancements include under Move, the introduction of mobile check deposit, cardless withdrawal, and pay via QR as key features to deposit, transfer, and make payments. Under the Protect, the card control features now allow clients to manage their card usage by themselves, including either temporarily or permanently blocking a card or securing a replacement without the need to contact the call center. If you've ever misplaced your wallet, but you know where it's somewhere safe or left your credit card at a restaurant, you can now temporarily block it until you retrieve it without needing to replace the card. Under Grow, clients can now open time deposit and investment accounts and get personalized financial advisory with a Track and Plan feature. Key milestones for the app include 8.7 million enrolled users with 4.8 million active users.
90% of what would be branch transactions are now done digitally. 51% of new to bank clients since January have been onboarded digitally, and an app rating of 4.8 and 4.5 for the Android and iOS apps respectively after the introduction of prompted ratings. One of the bank's first initiatives in artificial intelligence is the launch of the BPI Express Assist Intelligence or BEAi, BPI's generative AI-powered platform designed to serve as a digital companion for our Unibankers. BEAi enhances productivity by searching and summarizing information from the bank's knowledge base up to 3x faster than manual document searches, enabling Unibankers to respond to customers with greater confidence and efficiency. In its first year, BEAi received 99% positive feedback and achieved an app satisfaction rating of 9 from its initial 1,800 users.
One year post-launch, over 8,000 users have been defined to access BEAi and engage with the platform by asking over 300 questions per day. On screen now is a sample response from an inquiry posted to BEAi asking for the minimum age to open a time deposit. BEAi can communicate not only in English but also in Tagalog and Cebuano, two of the most widely spoken languages in the country, enabling it to connect with a broader user base through more natural and personalized conversations, resulting in higher user engagement and satisfaction. Moving on to agency banking, where we continue to expand the bank's customer reach in underserved areas through technology-enabled service delivery. For the third quarter of 2025, our partner base has increased to 33 brands from 25 brands, mainly from additional banner stores under the RRHI Group.
We now have 6,943 partner stores, 637 of which can process cash-in, cash-out transactions. Agency banking continues to demonstrate strong momentum, with product sales reaching 170,000 in the third quarter. A 20-fold increase from just 8,500 in the first quarter of last year. This translates to an average of 1,847 products sold per day. Deposit and withdrawal transactions also rose significantly to over 48,000, effectively expanding the physical presence of BPI without having to build a physical branch ourselves.
Moreover, product sales per store accelerated, rising to 24.9% in the third quarter, up 13.8% from 13.8% in the previous quarter, and just 1.6% from the first quarter of last year, highlighting improved productivity and deeper client engagement at the store level. Earlier this month, the bank marked a major milestone in its regional expansion with the opening of BPI Wealth Singapore, strategically located in the Marina Bay district. Authorized by the Monetary Authority of Singapore and operating under a capital market services license, BPI Wealth Singapore is equipped to manage investment portfolios, conduct investment research, and execute trade transactions. Initial offerings include global portfolio accounts under both discretionary and non-discretionary mandates with a minimum amount of $2 million.
This launch represents a major step forward in BPI's mission to bring its wealth and asset management expertise to a broader client base. To close, let me highlight a few points. We delivered another strong revenue-led performance for the third quarter, reflecting solid execution across our businesses. Our balance sheet remains healthy, with ample liquidity and strong capital levels. Asset quality continues to be manageable, with adequate allowance maintaining BPI's strong credit culture. We continue to accelerate growth through digital leadership. We remain focused on executing our strategic priorities and navigating the continuously evolving operating environment. Thank you, and we will open the floor to questions.
Thank you, Eric. Before we open the floor to your questions, please allow us a minute or two to set up at the venue. Again, just a reminder, if you're joining us via Zoom, there are two functions at the bottom of the Zoom webinar screen, which you may use to queue. One is the raise hand function. The host will then prompt you and unmute your line for you to speak. Alternatively, you may type in your questions in the Q&A box, and we will read out your question on your behalf. For those on-site, you may use any of the mics available at the floor, or you may raise your hand and we will have someone hand the mic to you.
Please, make sure as well to identify yourself by your name and company so we can address you accordingly. For the benefit of everyone attending this call, whether in person or online, we would like to encourage you to ask your questions during this session. We will refrain from taking questions after we end this call. Joining here in front with TG and Eric are our senior leaders, Tere Marcial, Head of BPI Wealth. Ginbee Go , Head of Consumer Banking. Louie Cruz, Head of Institutional Banking. Jenny Lacerna, Head of Mass Retail Products, as well as Jethro Sorra of Global Markets. Okay. We've received some questions in the Q&A box. We'll start off with the first question. Actually, it's from Rafa Garchitorena of Regis. Rafa's question is, what is driving the higher cost of funds?
The second part of the question is why is deposit competition intensifying, given policy rate cuts and RRR cuts?
Sorry. On the higher cost of funds, what we're seeing is that we're continuing to see some reduction in the CASA ratio, and obviously the time deposits being higher priced affect that total cost of funds. That's what's leading to the-
to the higher overall cost of funds. The actual cost of the time deposits has not really been going up. In fact, our time deposits have come down, but it's just the percentage, the increase in the percentage that's driving that up.
Okay. Thank you, Eric. We have a question from the Zoom actually. It's actually from DA Tan of JP Morgan. DA, please go ahead and ask your question.
Yeah. Hi, DA here. Good afternoon. Can you guys hear me?
We can hear DA, thanks.
All right. Awesome. A few questions from me. First, on the loan mix, right? We're already at 30.8% non-institutional. I just want to understand how you guys are thinking about the mix and actually the growth going forward, let's say for the balance of this year and next year.
At this point, we're not seeing ourselves at the end of the tunnel, right? At the end of the road. This 30% was the target that we had set back in 2021 for the end of 2026. We continue to reevaluate whether at what point we think this would come, but from what we see, we're not close to the end of the road yet. We think there's still a lot of room for continued growth. As I mentioned, this is an area that we think still has a lot of untapped opportunity. At this point, we aren't giving out new guidance for, let's say, the next five years.
As we're seeing it now, we're not close to the end. Certainly up to 35% is something that we think should be well within reason. We will continue to evaluate as that proportion grows, we'll continue to evaluate, mainly looking at where the opportunity, if the opportunities continue to remain.
DA, I don't think we should be looking at a mix of institutional versus non-institutional as a target. I think we run the business separately. We look at our non-institutional business, and we've invested a lot in that because we believe that there's significant margins to be made there. We have invested in data to try to build that business up. To this day, our growth in our non-institutional business is just sub 20%. It's really driven by credit card growth, auto loan growth, personal loan growth, and SME loan growth.
You look at the other side, you take a look at institutional lending, which is today growing about 8%, 9%, maybe 10%, depending on whether, you know, we land a couple of large deals, whether our corporate clients want to build up their working capital based on their outlook of their industries. Those two we look at independently. We will continue to focus on those two. If it happens that non-institutional will grow at 20% and institutional grows at 10%, and the mix today is 70%-30%, then you can do the math and see what will happen a year from now. Like that, the ratio just falls out from the math.
Okay. Thank you, TG. Before we proceed with some more of the online questions, just wanted to check if anyone from the audience had questions. Gilbert? You're good. Okay. We have a few more online questions in Zoom actually. The next question comes from Tejkiran Magesh of White Oak. On the NPL coverage front, could you help us understand why coverage is higher in institutional loans versus business banking? If you reference slide 11, NPL coverage for the institutional book is at 124% versus business banking's 87%.
That comes out of the fact that the way we provision is based on the ECL model. We run ECL, expected credit loss models on every portfolio. The number that comes out for ECL for institutional, the institutional book is X, and that X just happens to be 120% higher than the current NPL ratio. The ECL number for business bank is Y, and Y just happens to be, what's the number? 70% or 80-something% of the NPL. Now, the reason the ECL numbers might be less than the NPL numbers is because the SME book is collateralized. A lot of the loans there have collateral against it, whereas in the institutional book, a lot of the large corporate loans are not collateralized or clean.
If a loan there goes bad, then it's 100% loss.
Thank you, TG. Okay, shifting gears a bit, we have a question on funding from Emuel Olimpo of Metrobank. His question is, can you describe any deposit competition or I guess intensified deposit competition that we envision or anticipate through to the year end?
Yes. That's typical. Every year-end you see a ramp up for deposit towards year-end, primarily because the banks would want to make sure that we have enough liquidity crossing the year-end. We also expect loans to increase towards year-end, and that's why we see intensified competition towards year-end. Nevertheless, immediately after year-end, we also see this coming down. That's again the natural wave of deposits and loans through the year.
Thank you, Ginbee. We have a question. It's actually focused on the credit card business. There are actually two questions here from Chante Ong of JP Morgan. He asks how much of the credit card receivables are on regular rates versus SIP. How has this mix shifted over the years? The second question is on the NPL ratio for credit card receivables with regular rates versus the SIP.
Hello. On the first question, SIP actually has been gaining a lot of share over the years because I think at the end of the day, it gives the customer the flexibility to use it other than at point of sale. We actually offer SIP on a selective basis. This is for customers who actually, for example, do not use the card so often or have the tendency to actually just use the card for very simple purchases. We do proactive offers to those customers because the need might not just be really at point of sale, and we see that coming up over the past couple of years. The second question is?
Yeah, the second question is the NPL ratio. Is there, I guess, any difference between SIP and credit card receivables on regular rates?
No, no. We don't really see a huge difference in the NPL coming from the SIP loan availers and from the regular availers of a credit card, which uses it at point of sale or online.
Thank you, Jenny. The next question actually comes, it's back again, with DA Tan of JP Morgan. Given the current mix, and trend that non-institutional is growing faster, do you have updated credit cost outlook for this year, and next year?
I think what you're looking at into the end of the year is credit costs that are fairly similar to what we've seen in the last couple of quarters. That's generally where you would expect to see it. Even though the book continues to into the end of this year, so just in the fourth quarter, right? The movement in the mix probably won't be enough to move the credit cost significantly for the last quarter. Obviously, as that continues to expand into next year, then you'll start to see some changes in the credit cost.
Okay. Thank you, Eric. We have another question. Sorry. I'll go back later, Chante. There's a question from Anina Aligada of Standard Chartered. She's wondering if we have any guidance on the NPL ratio and NPL coverage by year-end. The second part of her question, is there a cap or a threshold for the NPL ratio given the expansion of the non-institutional loan portfolio?
Generally, the NPL ratio has been fairly consistent over the last couple of quarters. We think that'll remain fairly consistent over the last couple of quarters. Same for the NPL coverage. Again, the driver is going to be ECL rather than NPL coverage per se, but it will probably remain at about the same level. On the second question, there's no cap to it, right? We will continue to monitor the performance of the portfolio and use that. You know, we will scale back as needed if we see that performance isn't as we expect or as we want, but there is no cap per se.
Given that we expect to continue to apply the standards that we're applying now, we should probably expect the NPL ratios to not go much up from where we are right now.
I think it's very hard to try to characterize the way we run the bank with a single number. I think we need to be very clear that we operate the bank today looking on a granular level. We look at the different products, we understand the NPL levels of each product, and we build the programs around this product based on the profitability of each product. When we look at a business like personal loans, and we begin to see that the NPL level is beginning to go higher than we had expected, then we ramp down and we begin to put controls there. Is there a maximum limit for the whole bank, a single NPL? No. But we have limits on each product.
For example, I would tell Jenny, if credit card NPL goes over 6.5%, she's got a problem, right? At 4.5%, we're very happy to continue to grow the book there. I think let's be very clear that we're very comfortable with the current NPL levels where we stand, but that current NPL level of 2.25% is really driven because it's just the math that comes out from the different NPL levels from the different products. We watch each product. As we said, the NPL cover is just math coming out of what is known as ECL cover. ECL cover is the amount of provisions we put on each product based on what an expected credit loss model says we would lose on that product in the future. We're covering for losses in the future.
NPL cover is just covering the past. We are covering for the future as well.
Thank you, TG and Eric. We actually have a couple of participants who've raised their hands. The next question actually comes from Claire Diaz of Philequity. Claire, please go ahead. Sorry, Claire, are you there? Okay. We'll probably go back to you first. We'll come back to you later. We can go ahead. The next question actually is from Priya Ayyar. Priya, please go ahead.
Hi. This is Sangam here from Consilium. A couple of questions. One was, can you help us reconcile the difference between the rise in the loan yield versus asset yield? The loan yield was up almost 11 basis points quarter-over-quarter, while the asset yield was just up 1 basis point. Is there any repricing that is still pending, which is why it is not yet reflected in the overall asset yield, and the benefit of which would come in going forward?
No, no. Loan yields have been rising, but the rise in the yield, loan yield was held back by we increased the holdings in securities that were lower yielding, right? As you can imagine, a lot of government securities are gonna be lower yielding than some of the loans that we're extending, and the increase in our holdings there brought down average loan yields. Loan-
Is there a particular reason?
No. Loan yield, right? Loan yield is the yield on our client loans. Asset yield is the blended yield of both the loan yields and the securities we hold in the book for investments, or liquidity. So the fact that loan yields have gone up faster than asset yield means that as rates have come down, obviously securities yields have reacted faster because they're market driven, right? It shows that we have been able to hold our loan yields, and that's primarily because a lot of our loans are consumer loans, which are very sticky.
Right. Would that mean that we would have a bigger impact incrementally going forward, where there would be some pressure on the loan yields because of the declining interest rates? I'm just trying to understand whether-
Yeah. We've always said that in the long run, as policy rates come down, obviously loan rates have to come up because our corporate clients reprice their rates. The top corporates are price sensitive. If we don't react quickly to the top corporates, the Ayalas, the SMs, the Aboitizes, those loans will leave us. Those will reprice over time. There is a lag because they reprice on the average maybe six months. Whereas consumer loans hardly reprice. Maybe auto loans never reprice. Mortgage maybe reprice every maybe one year or maybe three years, five years, depending on the repricing term. Cards never reprice, right? The greater the share you have of non-institutional loans, the less sensitive your loan book is to falling rates, to falling policy rates.
I'll add also.
Right.
Mm-hmm.
Sorry. If I can just add. The rising proportion of consumer and SME in the loan mix has also lifted that. As TG mentioned, there is overall like downward pressure on interest rates because of the easing interest rate environment, but this has kind of been counteracted by our increased loan mix in the consumer and SME portfolios.
Incrementally, you know, when we look at the NIMs going forward, do you see, you know, where do you see the NIMs settling down based on the current interest rates, assuming that there are no further cuts? Do you see your NIMs settling down at these levels, or do you see maybe another 5-7 basis points decline before it settles down? I'm just trying to understand the dynamics as and when they play out.
I mean, given our current situation, we shouldn't be seeing much NIMs coming off much because as the repricings on the corporate work themselves into our book, and they will, right? Some of the recent rate easings have not yet filtered into our book, and they will over time, but these will be counteracted by the fact that our loan mix continues to skew towards the consumer and SME portfolios, and that will provide a counterbalancing force to the downward pressure because of lower interest rates.
Got it. As a follow-up on that, since our, you know, the non-institutional part of the book is growing faster, shouldn't the fee income from, you know, transactions also move in tandem? Because ideally that would be the key, you know, ROA driver going forward as your non-institutional part of the book grows faster.
Overall, yes. There are other. I mean, the fee income is composed of many things, right? One of the things that we've been seeing come off lately is, as I mentioned, some of the transaction fees came off because we discontinued the e-wallet loading. That resulted in some of the fees coming off. Moving forward, we expect continued pressure to reduce transaction fees, payment fees. That will provide some downward pressure on fees overall. As you mentioned, there are opportunities to raise it. Our growing card business, our increasing consumer loans, as well as our growing wealth management business.
Do you think the roadmap would be, say, maybe three to four years before three to four quarters at least, before we see the fee income growth in line with the non-institutional book growth? Or do you think that roadmap would be again further down the road, not four quarters, but more?
Depending on when some of these, I mean, some of these things come into play, right? I mean, as you mentioned, BSP is pushing towards zero P2P fees. It's not yet in effect. We think it's coming in the near term. If that comes in tomorrow, then obviously there would be higher downward pressure on NIMS. Sorry, on the fee income. If it comes in two years from now, then we'll put that off for a while, right? It's a very dynamic scenario because there are just so many variables in it.
Maybe to help you think through the way we look at fees, number one is cards. The cards business provides us about 30% of our fee business. The card fees are really driven by the billings from interchange fees, annual fees from cardholders, and I guess penalties and things like that. Sorry. Late fees, right? All of that is driven by card usage and the numbers in your cardholder base, right? That we expect to continue to grow. I don't think there's significant pressure on interchange fees because Mastercard and Visa dictate those fees, right? You take a look at the second fee driver, which is wealth management, which is about 15% of our fee business.
That one will grow as we continue to grow AUM in our book. We continue to be very bullish about that segment, that we continue to build up our AUM, get more corporate clients, handle more pension funds, and also are pushing our UITFs and our mutual funds down into a broader market by digitizing the ability to subscribe and redeem on our app, as well as on our distribution channels such as the agency, the partners, and on GCash and Maya. Right? The insurance business is the third, and it contributes about 10%-12% of our business. We believe there's much promise still in insurance. The country and our client base is still under-insured.
We are looking at programs not only on the life insurance part, which is generally the most profitable or generates the most fees for us in the life insurance, but there's significant potential as well on the non-life. My bank assurance team is very focused on getting more of our clients onto non-life insurance based on our bank assurance channel. The others, which used to be the big drivers before, are now smaller. For example, bank service charges, minimum balance, client statement fees, which they go in the branch, are clearly falling because we are digitizing most of our transactions. People are able to get statements online. People are able to transfer without having to go to the branch. There.
We've also rationalized our deposits, where we have many deposit products today that have no maintaining balance because we are after really the transaction fees that they might generate in terms of bills payments and InstaPay fees, right? The other one is the digital fees, which used to be growing very fast, particularly because of InstaPay fees. Obviously there's been competitive pressure there. We used to be PHP 25, then we moved to PHP 15, and now we're down to PHP 10. I believe that sooner or later, the BSP will come out with circulars that will basically make most banks bring that fee down to zero. The rest are very small. Remittances should continue to grow, but as you get competition from people like Wise or Remitly, that will fall.
You have, I guess, securities brokerage, and then asset sales. Those are small. That's the way I would think about it, in terms of how our fee business is growing. I don't think it's necessarily correlated with the growth of our non-institutional loan book. It really will be correlated with the growth of our customer base.
Got it. Thank you very much. I'll rest.
Thank you so much. Okay, actually, there's a question sent in earlier. It's actually in relation to BPI Wealth. So this would be for you, Tere. How do we envision leveraging on Singapore's regulatory and market environment to differentiate our offerings for Filipinos as well as regional investors?
Yeah. I'd rather have Tere answer that to the person directly because some of that.
Yeah.
The reason why
We have another question. I actually referenced this earlier, but there's another question from Chante. How much of our credit card receivables are SIP in percentage terms?
The receivables of SIP loans is about maybe 30%.
Maybe Jenny, give us a breakdown of revolvers.
Yeah. From the total outstanding receivables, about 55% are SIP. From the SIP portfolio, there are also merchants that are an SIP. These are the one that you buy on 0%, and they're the portfolio also that are on loan. That's 30% and 20%. The 50% are, in fact, retail transactions. The revolvers there is about a good 40%, close to 40%, and transactors about 10%-15%.
Okay. Thank you, Jenny. We have a question from Julian Rojas of Philippine Equity Partners. He asks, how should we view the lower tech OpEx growth of 3.2%? This is 3.2% year-on-year in 3Q versus the overall total OpEx growth. Are tech investments already plateauing, or will this accelerate again given continued digitalization efforts?
I'd love to say that it has plateaued, but I think what we'll see is we'll see a bit of a spike up in the fourth quarter, so that the growth in tech expenses will probably be similar to prior years. We're not yet plateaued on that. We are implementing some improvements that we think moving forward after 2025 are going to probably lead to a slowing in the pace of growth on the tech side, but not yet in 2025.
It's, I think it's more of a timing issue.
Yeah. I think what Eric's saying is that, you know, these tech vendors, they always send their invoices pretty late. They do catch up at the end of the year, so that's when a lot of it gets booked. You'll notice also that we have a lot of spike in December. That's mainly marketing and tech expenses that come to the fore. As Eric has intimated, we are making several changes in our tech vendor program and our tech providers that we believe we will see significant reductions going forward next year.
Thank you, TG and Eric. Actually, there's another question sent in. This is actually from Elizabeth Santiago of Abacus Securities. She's actually asking maybe just for us to comment already in terms of how big the teacher loans book is so far, I guess, as of September. Then perhaps maybe comment on the growth as well.
The teachers loan's about PHP 15 billion in loan books, and that's about 81% growth if you look at it year-on-year since we got it in 2024. From a size standpoint, there are about 900,000 teachers, and our penetration today is just about 7%, but that's already coming from a 4% last year. We're continuously growing in teachers loans.
[audio distortion]
A lot of things that went into 2025 and 2024 when we got it is that we have in fact turned the agents, our sales agents into in-house salespeople, and that has actually improved the performance by about 30% per individual. We also situated our agents and our offices in more strategic locations to be able to cover the schools. We also set up operational centers so that it's easy for our sales people to go to the DepEd, and to also go to the teacher, because we have found out that there's really areas wherein the commute are so long between DepEd and the school premises. We also have mapped that out. More importantly, the structure by which we actually manage our sales people are closer and tighter.
We have put in monitoring tools to be able to track performance on a team basis, on a regional basis, on a division basis. That collaboration with that better collaboration with our sales people, in fact resulted to about an 81% growth in our outstanding receivables. I think there's really so much potential. We also have intensified a relationship with the DepEd. We have assigned relationship managers per region so that we can, in fact, have more closer coordination when it comes to booking our teachers' loans, because as we're finding out, it really is very highly dependent on the divisions in each of the regions to be able to process and approve the loans for endorsement for teachers' loans to, in fact, allow us to disburse.
Those are the few big things that we've done that resulted to really a double-digit, almost 100% growth in outstanding receivables. Thank you.
Thank you, Jenny. Actually, another just a clarification again from DA regarding the credit card split, transactors, revolvers, and installment. If you can get the split.
From the retail and SIP, it's about a 55/45 split. Between the 55, SIP, there's 30% loans and 20% point-of-sale ZIP. This is the one that you actually use to be able to buy refrigerators, big ticket items. Of the remaining 45%, a good 30% of that are revolvers, a good 10% to 15% are transactors, and the rest are your receivables coming from your delinquent accounts. I hope that clarifies the question.
Thank you, Jenny. Okay, we have another question. The question now is from Gino Rojas of Macquarie. He's asking, in the last two months, we've seen some downgrades on the GDP growth outlook for the rest of the year and going into 2026, brought about by concerns about public spending. They were just wondering if some of this is already reflected in our ECL models.
I would suspect that the ECL model gets recalibrated. We build at the end of September, right? At the end of every quarter, we put in the new economic forecast. This September, there was a new model that was built. The model that we have today is probably the most accurate. At the September time point, that's probably your most accurate model going forward.
Okay. Just wanted to check again if there are any questions from members who are here on site.
How are you really impacted by the flood control? I mean, if you can describe in greater detail, especially Louie Cruz's business.
Well, first, let's talk about the outlook. I think your boss's question really was also thinking, you know, what's the outlook? In fact, that's one of the questions that we discussed a lot. We're trying to look at signs of whether there's any stress, right? Anecdotally, we're beginning to hear from research pieces who cover, you know, the other, that September was fairly weak. When we look at our September numbers in billings, our credit card billings for September were actually quite strong. That's not. We need to really drill down, but the data on merchant usage comes 60 days later. We won't be able to see it. There's anecdotal evidence that retail was fairly weakened in September relative to, let's say, even August. On the...
Maybe Louie can give a little color on what's happening on the, on the institutional banking side, particularly as it relates to, I guess, the flood control issue. Are we seeing particular clients holding back on working capital?
Great. Thank you, Gilbert. The overall exposure of the portfolio is really less than 1%. We basically will continue to closely monitor that. What we're also looking at is really the indirect exposure, wherein we might have clients like suppliers that may have flows coming in from DPWH. That's where we are monitoring. In terms of our exposure, in terms of the issue, it's less than 1%. I think the concern really more for our client is the government spending as a whole, right? Given this, there might be some slowdown or restrictions when it comes to specifically to infrastructure related spending.
For some positive side of it, though, if you look at this one side of the government, that's wherein it's doing quite well, and this is the energy sector. The GEAP program, I think we're in the phase IV already. A lot are bidding for it, and that's where you see conglomerates still bidding for it through private sectors. The good thing about it also, yeah, you see also some foreign investors bidding for it, bidding for those projects. We still see a good sign for it. A good sign in terms of spending and support from the government and partnership between private and the government. The other sector that we're seeing is that because of this DPWH issue, there's the shift in funding towards Department of Education.
That's where what we're hearing, that they might really pump up the spending in increasing the classrooms, the building of classrooms. Again, we're seeing some private companies, private sectors bidding for that. Those are good signs that, you know, and also opportunities for us to take part of. This actually related to our driver for our growth also for next year.
Is it fair to assume that it's not really that bad? Like, PPPs, do you still see hope there?
For certain sectors and industries, we still see.
Even outside of renewable energy, like airports.
Yes, the answer is yes. It's really bad for that issue because perception towards the country as a whole, it doesn't give a good light, right? Specific to certain sectors, industry as mentioned, I think there's still an opportunity for companies to grow and opportunities for projects within private can still take part of.
You're prepared to give an output number?
For my growth for next year? Okay. We're looking at 10%-12%, same range as last year, if that is acceptable to my boss. I think 10%-12% is something that we're looking at.
Regardless of the ICI, yeah?
Yes, so far, because actually, we have basis for that. We have a good, healthy pipeline.
I think that when if you look at it quite objectively, maybe the flood control was the gimmick, how people were able to steal money, right? But what it's done in the near term is it's made the government really slow down on real projects, and therefore it's possible that many of our clients who provide, let's say, cement or steel bars, will slow down a little bit because the projects are not there. But those projects will eventually come back. In fact, one I remember that distinctly was one of our steel clients, whose major product was the steel sheets for flood control, and that's completely stopped. But the reality is those sheets are used. I don't know how effective they are, but then they just have to repurpose.
There will be a temporary pause, but you need to believe that roads will continue to be built and PPP projects will be awarded once the government gets comfortable again, through this scandal.
Last question. On the consumer front, mortgages, high-end residential, you're seeing a slowdown? Or even-
Mortgages? Maybe Cass can answer that.
Car sales.
Mortgages, we continue to see very positive growth in our-
Including the very high-end?
Including the very high-end.
We don't have PHP 500 million.
You don't lend.
Those are Cass' business.
Okay.
No, but really, we've seen our loan releases in the housing loans has increased by 30%, over 30%. That really tells you that there's a good demand still. We're also very deliberate in our approvals and in our lending programs and making sure that we're lending to end buyers rather than just simply investors. 'Cause for flood control issues, it's usually the investors that get, you know, that slow down in terms of their purchases 'cause consumer confidence is down. In our case, a lot of our buyers are really end buyers for occupancy. We're still foreseeing growth in our mortgages book. Second is on car sales.
Car sales have actually slowed down in the industry, but we've seen strong growth again on our auto loans business, growing by close to 20% in loan releases.
It's slowing down even with the EVs?
The EVs is growing.
You don't wanna finance EVs?
We do finance EVs. We finance BYD. We finance Kia EVs. Even hybrids. That's where the growth has been. Overall, we've seen extremely strong growth coming also from our branch channel aside from dealer channel. Our branch channel has actually outpaced our dealer-generated auto loans book, which means that our own depositors are the ones who are actually buying cars. That's why we have better quality as well. These are the ones who would most likely go for EVs.
How's the portfolio that you inherited from RBank? The motorcycles. How is that doing?
Very strong growth. In fact, that's the other area that we see a lot of potential in. From a demand standpoint, and opening it to our. Just imagine, RBank, Robinsons Bank had over 150 branches. Now it's open to over 800 branches. We've doubled our loan releases and our loan book on motorcycle loans, and there's still demand.
Thank you so much.
Thank you.
Okay, just wanted to check if there are any other questions from the participants who are here on site? Actually, yeah, that just about does it for so far with no other questions from our participants online. I wanted to thank everyone again for your questions. Of course, we at BPI are always welcome with your feedback and take them into careful consideration. Before we end the call, maybe call on TG for some final thoughts.
Just to reiterate our thank you for participating in this call, for the very open questions, and thank my colleagues here for also participating. We look forward to talking to all, engaging with you. Again, as usual, if there are any questions or follow-up questions, our team would be more than happy to answer them. Looking forward to seeing all of you again in three months.
Okay. Thank you, TG, Eric, and the rest of the BPI Senior Management. Ladies and gentlemen, that concludes today's earnings call. Thank you again for your participation. To those joining us online, you may now disconnect. For those who are with us on-site, please do join us for some refreshments. Thank you.