Lucio Tan's PNB vs. Sy's CBC: PNB's footnote credit provisions beat China Bank's

 

In Q1 2026, Philippine National Bank won the low-provision race, setting aside far less than China Bank and helping both banks keep profits in the ₱6bn club.

In Philippine banking’s first quarter of 2026, the race was not merely to lend more, widen margins or charm depositors. It was also to provision less. On that track, Philippine National Bank crossed the line ahead of China Banking Corporation. PNB set aside just ₱225.7m for impairment, credit and other losses, down 18.6% from a year earlier, saying the decline reflected improved credit portfolio performance. CBC, by contrast, booked a still-modest but larger ₱683.8m provision, up from ₱285.1m a year earlier. 

The prize was visible in the bottom line. PNB’s net income reached ₱6.37bn, while CBC’s was ₱6.78bn. In both cases, small credit charges helped keep earnings comfortably in the ₱6bn range, despite a quarter marked by market volatility, bond-price pain and noisy treasury results. 

Yet the two banks arrived there by different roads. PNB’s provision was strikingly light: around ₱225.7m against net loans and receivables of ₱755.9bn. CBC’s charge was roughly three times larger in peso terms, but it sat against a much larger loan book of ₱1.085trn. On an annualized basis, PNB’s provision was about 0.12% of net loans, while CBC’s was around 0.25%—both low by the standards of a nervous banking cycle.

That made both banks outliers among large listed peers. BPI booked ₱5.5bn in provisions in Q1 2026, up 83.3% year on year. Metrobank’s provision rose to ₱3.37bn from ₱2.61bn. Security Bank set aside about ₱3.9bn. BDO also said earnings were tempered by higher provisions as it built reserves against geopolitical and inflation risks. Against that backdrop, PNB and CBC looked like banks sailing through a squall with unusually light raincoats. 

PNB’s explanation was simple: credit behaved better. Management attributed the lower provision to improved performance in the credit portfolio. That helped offset weaker market-related income and supported a 4.5% rise in net income. Net interest income rose 5.8%, helped by a sharp fall in interest expense, while provision expense shrank instead of swelling.

CBC’s story was less about cutting provisions and more about keeping them contained while strengthening buffers. Its provision rose sharply year on year, but at ₱683.8m it remained small relative to its earnings power. CBC said it maintained steady asset quality with a 1.6% NPL ratio and lifted NPL coverage to 110%. The result was a ₱6.78bn quarterly profit, up 4.3% year on year. 

The contrast in credit quality is important. CBC’s loan book looked cleaner: gross NPL ratio of 1.6%, NPL cover of 110%, and net loan growth of 4.5% from end-2025. PNB’s gross NPL ratio was much higher at 4.8%, with NPL coverage of 78.4%. PNB won the race to the lowest provision, but CBC looked better armored.

In other words, PNB’s provision decline flattered earnings more immediately; CBC’s balance sheet looked more defensively provisioned. PNB’s small credit charge was a powerful earnings lever because every peso not provisioned drops close to the pre-tax profit line. CBC, meanwhile, spent more on provisions yet still reached a higher net income figure, helped by a larger balance sheet and stronger net interest income of ₱19.5bn versus PNB’s ₱13.5bn. 

Investors should resist reading the low-provision derby too simplistically. A falling provision can mean better borrowers, cleaner collections and fewer looming defaults. It can also mean thinner reserve-building if asset quality later turns. PNB’s lower provision was explicitly tied to improved credit performance, but its lower NPL coverage leaves less room for error than CBC’s. CBC’s higher provision, though still modest, looks more conservative given its already lower NPL ratio. 

Still, in a quarter when several peers padded reserves, PNB and CBC stood apart. Their credit costs were not the main villains of the income statement. Market losses and bond revaluations caused more visible bruising, especially through other comprehensive income. For PNB and CBC alike, the credit book did not demand the kind of heavy provisioning seen elsewhere. That was enough to keep profits in the ₱6bn club.

The verdict: PNB beat CBC in the race to the lowest Q1 credit-loss provision, and it did so with a year-on-year decline driven by better credit portfolio performance. But CBC remains the cleaner credit-quality story, with lower NPLs and stronger coverage. PNB won the sprint; CBC may be better built for the marathon.

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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.