Rising incomes boost peso deposits, BSP says

Peso-denominated deposits in the country surged further in April, due mainly to rising incomes and growing confidence in the banking sector.

The growing deposit base helps ensure that banks have enough resources to fund—through loans—investment and consumption activities of households and enterprises, said the Bangko Sentral ng Pilipinas.

Data from the BSP showed that peso-denominated deposits placed in banks amounted to P3.7 trillion as of end-April, rising by 8.5 percent from P3.4 trillion in the same period last year.

About half of the deposits are in regular savings accounts, while the other half are in demand and time deposit accounts.

“The continued growth in deposits reflected sustained depositor confidence in the banking system,” the BSP said in a report.

Data also showed that the increase in deposits led to the increase in the local banking sector’s resources to P7 trillion, improving by 8.4 percent from P6.46 trillion in the same period last year.

The BSP said the country’s banking sector remains stable despite the turmoil in the global economy brought about by the debt woes of the United States and several European countries.

Regulators said the problems offshore do have an impact on emerging market economies like the Philippines, but the effects are expected to be “bearable.”

Aurelio Montinola III, president of the Bankers Association of the Philippines (BAP), said last week that while banks in the country are monitoring developments offshore, the local banks remain “calm” due to their sound fundamentals.

The BSP said banks in the country are generally well capitalized, thus have the ability to absorb risks. They also have limited exposure to bad debts.

It said the average capital adequacy ratio (CAR) of banks in the country stands at about 16 percent, which is above the BSP’s minimum requirement of 10 percent and the international benchmark of 8 percent.

CAR is the proportion of capital to risk-exposed assets, and thus measures the ability of banks to absorb the adverse impacts of risks, such as loan defaults by borrowers.

The average nonperforming loans (NPL) ratio of banks, meantime, is at 3.7 percent as of end-April, improving from 4 percent as of the same period last year.