PH banks bigger, more profitable despite volatility, says BSP

Philippine banks continued to grow in size and profitability in 2017 despite the volatile market conditions and the increasing sophistication of financial products and services around the world, the Bangko Sentral ng Pilipinas said on Friday.

In a press statement, the regulator said the local banking system — which it described as “the core of the financial system” — remained sound, as shown by the further strengthening of banks’ balance sheets with positive double¬ digit growth in assets, loans, investments, deposits and capital.

“Banks sustained their profitability which came from strong interest income from lending activities,” the central bank said.

For last year, the banking system posted an annual asset expansion of 11.6 percent to P15.2 trillion, driven by a 16.4-percent loan expansion to P8.9 trillion, and funded by the stable base of deposits which grew by 11.6 percent to P11.7 trillion.

Meanwhile, net profit went up by 9 percent to P167.6 billion.

Banks also reported an improvement in their average bad loan ratio to 1.7 percent and a strong capital adequacy ratio of 15 percent. They likewise kept sufficient liquidity with adequate stock of high-quality liquid assets as the liquidity coverage ratio registered at 185.3 percent.

The banking system’s foreign currency deposit units system also showed strong liquidity and positive net profit, while the growth in the trust industry’s total assets was lifted by the expansion in the stock of financial assets.

Foreign bank branches and subsidiaries also sustained their growth trajectory as a total of 26 foreign banks were approved and authorized to operate by the BSP in the Philippines as of end-December 2017.

“Banks are making progress in expanding their geographic footprint as well as taking advantage of opportunities from utilizing digital technology in financial transactions,” the central bank said.

As of end-December 2017, the country has 587 operating banks and 11,206 bank branches and other offices, including 919 micro banking offices. There were also 20,279 automated teller machines and 71 banks with electronic banking facilities.

Non-bank financial institutions consisting of firms with quasi-banking functions and non-stock savings and loan associations likewise sustained their financial condition and earnings performance.

“Overall, the Philippine financial system’s positive performance in 2017 has been grounded on the BSP’s sustained implementation of proactive reforms that will raise the bar on risk management systems, promote sound liquidity and capital positions, and enable greater access to financial services,” the central bank said. “Banks’ commitment to these reforms and prudent risk-taking ensure the stability and soundness of the financial system.”