BSP sees aggressive bank branch network expansion

Local banks’ physical networks are expected to expand significantly as regulatory restrictions on the opening of new branches in key Metro Manila cities expire in July this year.

Bangko Sentral ng Pilipinas Deputy Governor Nestor A. Espenilla Jr. said banks had been expanding their network to sustain or grow their respective market shares as the economic boom fueled demand for loans.

“You will see the furious construction of branches,” Espenilla told reporters.

By July 1, the BSP’s restrictions on the opening of new branches in cities in Metro Manila will expire, allowing banks to set up shop wherever they want.

The restrictions were imposed to avoid the overcrowding of banks in the metropolis and, at the same time, encourage the lenders to expand their networks in the provinces.

Espenilla said it was part of the BSP’s strategy to let the country’s banks expand to make them more competitive. This comes ahead of the planned integration of Southeast Asia’s banking sector, which would likely take place in 2018.

Having larger networks would allow the local banking sector to at least maintain their dominance over the Philippine market even as foreign banks try to gain a foothold.

The expansion of branch networks would also improve the banking sector’s deposit-taking operations and the mobilization of these funds through new loans to businesses and households.

Espenilla said the growing income levels in the upper and middle classes had likely led to an improvement in the savings rate of households. Latest data also showed loan growth at 16.4 percent at the end of last year, accelerating from 14.8 percent the month before. This reflects higher demand from both consumers and businesses, he said.

He said the liberalization of rules on new branches would also encourage banks to establish operations in underserved locations in the country.

“We recognize the need to include more people in the financial system. One way to get them is to make banks nearer to the public,” Espenilla said.

At the end of September last year, the number of bank head offices, branches and other banking offices reached 9,720, up from 9,301 offices at the end of September 2012.