Local financial system posts strong expansion

THE Philippine banking system saw robust growth in 2016 as minimal exposure to crossborder flows allowed it to remain resilient versus global uncertainties, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

The central bank said the local financial system posted doubledigit growth in loans and assets while keeping bad debts at bay, as banks remained on solid footing despite increased volatility in the global markets.

“The banking system remained domestically oriented as cross-border financial position of banks was minimal,” the BSP said in a statement on Tuesday.

BSP Governor Amando M. Tetangco, Jr. described 2016 as a “challenging” year for markets after surprising developments shocked the global economy. Among these key events were the United Kingdom’s decision to leave the European Union back in June, the victory of now-President Donald J. Trump during the United States elections, and the Federal Reserve’s rate hike, among others.

Still, the Philippine economy remained growing last year, even clocking in a 6.9% pace that brought the country as among the fastest-growing in the region — a move that spurred further expansion in the banking industry.

The central bank said that the Philippine financial system saw a 16.6% rise in total lending to reach P7.612 trillion, alongside a 13.8% jump in deposits now worth P10.507 trillion. Assets held by the banks likewise expanded by 12.4% to amount to P13.6 trillion, the BSP said in a statement.

Despite the surge in credit, the share of non- performing loans — or those at risk of default — dropped to 1.9% by yearend, improving from a 2.09% share in 2015.

Banks also reported a cumulative net income of P154.125 billion last year, up by 13.9% from the P135.341-billion bottom line in 2015.

The lenders were likewise able to maintain more than enough financial buffers, as they posted a capital adequacy ratio at 15.4%

as of end- September. This is well above the 10% requirement set by the BSP and the 8% international standard.

A total of 602 banks operated in the Philippines last year, with 10,576 branches and banking offices scattered nationwide. The number of firms dropped from 632 banks in business in 2015, although their branch network was just at 10,124 that year.

Trust companies likewise grew their assets by over a tenth to reach P3 trillion, which represents 21.8% of banking industry resources, the central bank said.

On the other hand, foreign bank branches also reported a 6.8% asset growth, on the back of increasing deposits and capital infusion from its parent firms.

International credit raters have cited the Philippines’ sound banking system as a credit strength in affirming the country’s investment grade status. Moody’s Investors Service also kept its “stable” outlook for the local banking sector in a recent report, citing high asset quality when compared to other Asian economies.