Ro­bust growth con­tin­ues

Business World - - FRONT PAGE - By Leo Jay­mar G. Uy Se­nior Re­searcher

GROWTH in as­sets of the coun­try’s big­gest banks con­tin­ued to be ro­bust last quar­ter, fu­elled by these lenders’ ag­gres­sive loan ex­pan­sion. Busi­ness-World’s 2nd Quar­ter

Bank­ing Re­port shows the com­bined as­sets of uni­ver­sal and com­mer­cial banks (U/KBs) op­er­at­ing in the coun­try grow­ing 13.93% to P14.01 tril­lion from P12.3 tril­lion the past year.

The lat­est as­set growth pace is faster than the 13.41% year-on-year in­crease in the first quar­ter of this year and quicker than the 6.5% ex­pan­sion of the coun­try’s gross do­mes­tic prod­uct (GDP) in the sec­ond quar­ter. GDP, which is the amount of fi­nal goods and ser­vices pro­duced in the coun­try, mea­sures the coun­try’s eco­nomic per­for­mance for a pe­riod.

Fu­elling as­set growth in the sec­ond quar­ter of this year was the 18.38% year-on-year in­crease in bank loans to P7.116 tril­lion from last year’s P6.011 tril­lion. Loans com­prise around half of the big banks’ as­sets.

But banks’ abil­ity to ab­sorb losses eased slightly as their me­dian cap­i­tal ad­e­quacy ra­tio (CAR) went down to 18.45% in the sec­ond quar­ter from 18.66% in the pre­ced­ing three-month pe­riod. Nev­er­the­less, the ra­tio re­mains well above the reg­u­la­tory min­i­mum of 10% set by the Bangko Sen­tral ng Pilip­inas (BSP) as well as the in­ter­na­tional stan­dard of eight per­cent. CAR, which is a mea­sure of a bank’s sol­vency, in­di­cates its abil­ity to ab­sorb losses with­out hav­ing to im­peril funds en­trusted by de­pos­i­tors.

In terms of prof­itabil­ity, the me­dian re­turn on eq­uity (RoE) of U/KBs im­proved to 4.7% in the sec­ond quar­ter of this year from 4.27% in the first three months of 2017. RoE mea­sures the amount that share­hold­ers make on ev­ery peso in­vested in a com­pany.

As­set qual­ity edged down some­what as the non-performing loan (NPL) ra­tio of the big­gest banks in­creased to 1.74% in the sec­ond quar­ter from the first quar­ter’s 1.64%. This, as to­tal bank bor­row­ings in­creased 4.87% on a quar­ter-on-quar­ter ba­sis.

The sec­ond quar­ter marks the last three months un­der the watch of for­mer BSP chief Amando M. Te­tangco, Jr., who was suc­ceeded last July by cur­rent BSP Gov­er­nor Nestor A. Espe­nilla, Jr.

Since 1987, Busi­nessWorld has been track­ing the quar­terly per­for­mance of the coun­try’s largest lenders based on their pub­lished state­ments of con­di­tion.

The news­pa­per’s quar­terly bank­ing re­port ranks banks in terms of the size of their bal­ance sheets. Apart from as­set size, the re­port pro­vides other key ra­tios to mea­sure bank per­for­mance like cap­i­tal ad­e­quacy, earn­ings and liq­uid­ity — all key com­po­nents of the CAMELS (cap­i­tal ad­e­quacy-as­sets-man­age­ment ca­pa­bil­i­tyearn­ings-liq­uid­ity- sen­si­tiv­ity) sys­tem used in­ter­na­tion­ally in eval­u­at­ing a lender’s health.

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