Phl banking sector, a catalyst for strong growth
The Philippine banking sector continues to be a cornerstone of the country’s thriving economy, serving as a crucial catalyst for sustained growth. Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said the country’s banking system “is in good shape unlike in previous crises.”
“Many of us remember that our banking system got into trouble in the 1980s along with Latin American countries. In fact, we call that the Latin American debt crisis. We were part of it,” Remolona said in a forum.
“And so, when we tried to recover around 1989 from the Latin American debt crisis, the banks were part of the problem; they were not part of the solution. The banks had to repair their balance sheets,” he added.
According to Remolona, the banks also got into trouble in 1997 and 1998 during the Asian financial crisis.
“They had to repair their balance sheets. And so, they were part of the problem. This time around, they were part of the solution. They went through the pandemic with very healthy balance sheets,” the BSP chief said.
Remolona pointed out that Philippine banks have an average capital adequacy ratio or capital buffers of 16 percent, well above the BSP’s minimum requirement of eight percent.
Likewise, he said the liquidity coverage ratio of Philippine banks is at 183 percent, also well above the international norm of 100 percent.
“Banks have more than adequate capital, which means they can still support our growth,” he said.
Economic managers see the country’s gross domestic product (GDP) growth picking up to a range of 6.5 to 7.5 percent this year from last year’s 5.6 percent.
Latest data from the central bank showed credit growth accelerated to an eight-month high of 7.8 percent in January as lending amounted to P11.54 trillion.
However, the share of bad loans to the banking sector’s total loan portfolio went up to an eight-month high of 3.44 in January from 3.24 percent in December 2023, snapping two straight months of decline, as borrowers felt the pinch of elevated interest rates.
“That is pretty good. Coming out of the pandemic, it was nearly five percent. During the Asian (financial) crisis, it had reached 12 percent. 3.4 percent is not so bad. We want to bring it down to two percent or 1.5 percent. That is what you get during good times,” he said.
Remolona said the banks “have been part of the solution rather than part of the problem.”
Data showed the assets of banking sector went up by 8.9 percent to P25.93 trillion in 2023 from P23.81 trillion in 2022. The total resources of universal and commercial banks increased by 8.7 percent to P24.32 trillion, while assets of thrift banks grew by 7.4 percent to P1.1 trillion from P1.01 trillion.
Likewise, the earnings of Philippine banks jumped by 31 percent to hit a record P356.49 billion in 2023 from P272.56 billion in 2022, driven by higher interest and non-interest income.
BIG BANKS LEAD THE WAY
Sy-led BDO Unibank Inc. grew its earnings by 28.5 percent to hit an all-time high of P73.41 billion in 2023 from P57.1 billion in 2022, driven by strong growth across its core businesses.
Likewise, Ty-led Metropolitan Bank & Trust Co. (Metrobank) posted recordhigh earnings of P42.2 billion in 2023, 28.9 percent higher than the P32.78 billion record in 2022, fueled by asset expansion, higher margins, improving efficiency levels and better asset quality.
“This indicates that we are firmly on track with our long-term growth strategies supported by our highly capable and resilient team of Metrobankers and strong balance sheet. We look forward to further expanding our partnerships with all our stakeholders,” Metrobank president Fabian Dee said in a statement.
The profit of Ayala-led Bank of the Philippine Islands (BPI) also jumped by 30.5 percent to hit an all-time high of P51.7 billion from P39.6 billion on the back of record revenues and lower provisions for potential loan losses.
Another bank owned by the family of the late retail and banking magnate Henry Sy, China Banking Corp., also booked a record earnings of P22 billion in 2023.
“Our strong growth in 2023 solidifies our position as one of the top four banks in the country,” Chinabank president and CEO Romeo Uyan Jr. said.
The profit of Yuchengco-owned Rizal Commercial Banking Corp. (RCBC) inched up by 1.1 percent to hit a record P12.22 billion in 2023 from P12.1 billion in 2022.
“RCBC saw another breakthrough year in our financial performance, complemented with more recognitions in digital banking and customer service,” RCBC president and CEO Eugene Acevedo said in a statement.
Security Bank Corp. booked a net income of P9.1 billion, while revenues reached P43 billion in 2023.
“The economy is adjusting to moderating levels of inflation and continued elevated interest rates. Our growth for 2023 in both loans and deposits was evident across our retail and SME (small and medium enterprises) segments. In turn, our wholesale teams successfully secured key mandates to support client growth initiatives. We will accelerate that growth in 2024 and continue to deliver on our transformation goals,” Security Bank President and CEO, Sanjiv Vohra said.
Government financial institutions also booked record earnings last year.
State-run Land Bank of the Philippines ended 2023 with a record profit of P40.3 billion, driven by strong revenues from loans and investments alongside prudent cost management.
“Landbank’s strong financial performance in 2023 exemplifies sound management committed to deliver remarkable results in a thriving economy. We will build on this growth momentum to further drive meaningful investments in advancing inclusive and sustainable development in the country,” Landbank president and CEO Lynette Ortiz said.
Based on its unaudited statement of income, the earnings of Development Bank of the Philippines (DBP) slipped by to P5.47 billion in 2023 from P5.61 billion in 2022.
DEBT WATCHERS’ PROJECTIONS
S&P Global Ratings believes the projected robust economic growth this
year could shape up into a better year for Philippine banks.
S&P Global Ratings credit analyst Nikita Anand said Philippine banks are well placed to ride the wave of the Philippines’ robust economic growth this year.
“We believe improving macroeconomic conditions will offer good growth opportunities along with stable asset quality,” Anand said.
She said the Philippine banking sector’s metrics should stay relatively healthy at a time when real GDP growth is among the highest in the region.
The debt watcher is expecting the Philippine economy to grow by about six percent for 2024 and 2025, compared with 5.2 percent in 2023.
On the other hand, Moody’s Investors Service has maintained a stable outlook for Philippine banks as interest rate cuts from the BSP this year are seen to support economic recovery.
In a report on the Philippine banking system, the debt watcher said the outlook remains stable as banks’ operating environment would likely improve amid hopes of a stronger economic growth for this year.
“We forecast that the Philippines’ GDP will expand by 5.9 percent in 2024 and six percent in 2025. Despite battling high inflation, the Philippines remains one of the fastest growing economies in Asia,” Moody’s said.