Upbeat local economy fuels banking growth
The expanding business activity in Cebu and its consumption-led economy have continued to fuel the growth of the banking industry this year.
Cebu Bankers Club president Mario Fritz Palileo expressed his positive assessment on the performance of Cebu's banking sector, saying both loans and deposits posted gains this year.
Palileo attributed the continued growth of the banking sector to the sustained expansion of the domestic economy which grew 6.9 percent in the third quarter of 2017.
"Cebu was one of the large contributors to this GDP (gross domestic product)," the bank official told The FREEMAN.
Citing figures, he said bank loans extended by banks in Central Visayas as a whole reached P167.91 billion in the first half of 2017, up 23.44 percent from P136.02 billion in the same period last year.
Based on data from the Philippine Deposit Insurance Corp, bank deposits in Cebu as of June 2017 reached P467.824 billion, up 10 percent from P423.66 billion recorded in the same period last year. However this was lower from the P468.36 billion recorded as of end 2016.
From January to June 2017, total deposit accounts held by Cebu banks also stood at 2,454,967 from 2,372,473 million in the same period in 2016. The number of banking offices in Cebu as of end June this year also reached 545 from 513 last year, accounting for most in the Central Visayas region which has a total of 751 as of the first half.
From January to June 2017, Central Visayas, which also includes Bohol, Negros Oriental and Siquijor provinces, also recorded a 20.5 percent rise in bank deposit amount to P557.704 billion from P462.8 billion in same period last year.
This was also up from P552.05 billion as of end 2016.
Central Visayas also recorded 2,979,213 million accounts in the whole region as of end June.
Furthermore, bank deposits in Bohol reached P42.082 billion; Negros Oriental, P44.942 billion; and Siquijor, P2.856 billion.
Savings and time deposits remained the main fund sources of local banks. Other deposits include demand deposits and foreign currency deposit units (FCDUs).
Aside from economic expansion, the increasing population is also driving banking's growth.
The increasing employment, robust consumer spending and household expenditure are also among the drivers of the sector's growth.
Cebu's vibrant and growing economy which is mostly consumer-driven is also supporting this growth. Cebu is seen to sustain this growth considering the consistent rise in bank deposits in the last years.
2018 OUTLOOK
CBC's Palileo sees a sustained growth in the banking industry next year.
"For 2018 my forecast is that banks loans and deposits will still continue to grow with the implementation of the first tranche of the tax reform of the Duterte government," the CBC official said.
Earlier, President Duterte passed the first package of the Tax Reform for Acceleration and Inclusion Act (TRAIN) which seeks to cut down the personal income taxes and raise taxes imposed on cars, fuel products, and sweetened beverages, among others.
The tax reform is considered a key for the government to fulfill its ambitious massive infrastructure spending within Duterte's term.
"The government will start with its Build, Build, Build program that will bring investors to our country," he said.
"Although inflation may set it because of increase in fuel prices, consumption will still be present because of the jobs created by infrastructure projects and the adjustment of the income tax bracket for individual taxpayers," Palileo explained.
In its Report on Economic and Financial Developments for the third quarter of 2017, the Bangko Sentral ng Pilipinas said the banking system in general remains sound and resilient.
"Total resources of the banking system grew by 14 percent to P15 trillion as of end-September 2017 from P13.1 trillion in the same period in 2016," the central bank noted.
Bank lending by universal and commercial banks, net of banks' RRP placements with the BSP, grew by 21.1 percent as of end-September 2017 from the same period in 2016, of which 88.8 percent went to production activities.
The Philippine banking system’s gross non-performing loan ratio improved to 1.9 percent relative to the previous year’s ratio of 2.1 percent, as its non-performing loan coverage reached 113.9 percent as of end-September 2017.
Similarly, capital adequacy ratios as of endJune 2017 improved to 15.3 percent and 16 percent on solo and consolidated bases, respectively, and remained well above the 10-percent regulatory threshold of the BSP and 8-percent minimum by international standards.
The Philippine economy exhibits growth, expanding at a rate of 6.9 percent in Q3 2017. This brought the yearto-date real GDP growth to 6.7 percent, on track to achieve the national government’s 2017 growth target range of 6.5-7.5 percent.
Growth was generally broad based during the review quarter. On the supply side, the sustained solid performance of the services and industry sectors continued to buoy the domestic economy amid a deceleration in the agriculture sector.
On the demand side, output growth was driven by the acceleration in government spending along with the positive lift provided by the uninterrupted double-digit growth in the exports sector since first quarter of 2017 and the usual vitality provided by household consumption and capital formation.
For Cebu, Palileo believes the economic zones on Mactan Island "and others outside MEPZ industries and shipbuilding were main contributors on the industry side, and BPOs on the services sector."
"On the demand side, consumption increased particularly on "education, household furnishing and maintenance and restaurants and hotels posted increases of 10 to 12 percent," he said.
Looking ahead, the BSP said external headwinds coming mainly from key advance economies’ ongoing shift toward policy normalization may have financial and real-sector impact on the domestic economy.
"Nevertheless, the country’s solid macroeconomic fundamentals and built-in buffers as well as sufficient policy space to pursue appropriate and timely response to possible shocks should mitigate any adverse spillovers and keep the economy on track toward achieving its growth objectives," the bank regulator explained.