PHILIPPINE National Bank (PNB) said on Thursday its nine-month net profit jumped 134 percent to a record P2.11 billion from the same period last year, putting it on track to end the year with bottom-line income at its highest level in 12 years.

Net interest income rose by 30 percent to P6 billion, boosted by increased lending and wider interest margins.

Total loans and receivables increased by 24 percent to P113.9 billion, with both the corporate and consumer loan segments contributing to growth, it said in a statement.

“The share of loans total assets went up from 33 percent in December 2008 to 40 percent in September 2009,” it said. “As a result, the deployment of funds to higher-yielding assets improved the bank’s interest margins.”

Deposits increased by P10 billion to P211.2 billion as of end-September, with the deposit mix improving in favor of low-cost funds.

Trading gains also boosted the bottom-line figure, surging by 215 percent to P1.02 billion due to an improvement in mark-to-market valuations of securities.

The profit performance improved despite higher provisions for impairment and credit losses.

The Lucio Tan-led bank made additional provisions of P1.1 billion for impairment loss covering loans and receivables and foreclosed assets. Total provisions covered 79 percent of total bad loans.

“PNB opted to take a more prudent stance given the lingering vulnerability of the local economy to adverse market conditions, which may cause some deterioration in the credit quality of some accounts,” it said.

The bank’s nonperforming loans ratio continued to improve, dropping to 6.9 percent as of end-September from 10.6 percent a year earlier. The ratio peaked at more than 50 percent some years ago.

In August PNB and affiliate Allied Banking Corp. acquired a combined 90-percent stake in Xiamen-based Allied Commercial Bank (ACB) for about $80 million—becoming the first local banking group to own a locally incorporated bank in China.

PNB and Allied, which Tan also owns, expect the investment initiative to boost their remittance business as they set their sights on money sent home by foreign-based Chinese nationals.

For ACB, the increased capital paved the way for its expansion beyond its head office in Xiamen and branch in Chongqing and the offering of a wide range of products and services that will put it in direct competition with domestic Chinese banks.

In a recent interview, PNB president Omar Byron Mier expressed optimism about the possibility of a merger with Allied Bank by 2010.

PNB, the surviving entity, expects the union to catapult it toward becoming the fourth-largest local financial institution, and give strong competition to Banco de Oro Unibank, Metropolitan Bank & Trust Co. and Bank of the Philippine Islands.

PNB, currently the fifth largest in assets among local banks, had total assets of P286 billion as of end-September, representing a growth of P9 billion or 3.4 percent from end-2008.

The merger was supposed to have been completed this year, but was delayed because of the need to comply with US banking regulations requiring Allied Bank to divest its 28-percent equity share in California-based Oceanic Bank prior to merger.

The Tan group is targeting the middle of next year to complete the share sale. E. de la Cruz