Bank of the Philippine Islands’ nine-month profits fell 30 percent against the same period last year as it dealt with the combination of higher fund cost and lower yields from its interest earning assets.

BPI generated P1.5 billion in net income for the third quarter, bringing its total three-quarter earnings to P5.3 billion.

The lower profits were culled from revenues, which contracted by 8.7 percent, wiping out the bank’s efforts to keep its cost of funds flat at 2.2 percent.

A lackluster securities trading opportunities this year hit the banking industry hard.

Trading income, which used to deliver fat gains for the banks.

Lower trading income and profits from insurance subsidiaries depressed BPI’s non-interest income by 17 percent.

Remittances coursed by overseas Filipino workers through the bank surged by 38 percent, surpassing the 17 percent industry growth.

“2008 has been very tough for the banking industry and given the highly volatile markets, it would be a very positive development if the bank can maintain a return on equity at a double digit level this year,” BPI president and chief Executive Officer Aurelio R. Montinola III said in a statement.

To keep customers from jumping to the competition, BPI offered investment instruments, which for banks, cost more than cheap bank deposits. For the third quarter, the bank increased its Asset Management and Trust funds by 25 percent to P301 billion, sacrificing growth for its low-cost bank deposits, which reached only P493.8 billion, lower than the end-2007 levels.

BPI, however, continued to see growth in its loan businesses. Overall net loans grew by 21 percent against the same period last year. Various consumer loan products, ranging from housing, auto, and credit card receivables, grew higher by 29 percent, 17 percent, and 27 percent.

These brought BPI’s market share for the housing and auto loan products at 24.9 percent and 26.5 percent.

The non-performing ratio for housing and auto loans remained below 4 percent.

BPI set aside P1.6 billion as buffer funds for its assets that may not be collected.

It added that it does not have any collaterized debt obligation (CDO) in its books or any direct exposure to any major U.S. investment bank.

Its capital adequacy ratio, or the share of the capital against risk-weighted investments, is at 13.2 percent, higher than the minimum 10 percent required by the industry regulator.

“The outlook for 2009, we believe, may be more challenging. We are closely monitoring developments and ready to respond to changing times,” Montinola concluded.