BSP: PH banking system remains sound, stable

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The Philippine banking system continues to remain sound and stable despite the uncertainties in the global economy, according to the Bangko Sentral ng Pilipinas (BSP).

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“The Philippine banking system remained resilient amid the subdued global economic environment,” the BSP said in the latest “Report on Economic and Financial Developments.”

The central bank also stated that banks’ core balance sheets were marked by steady growth in assets, deposit base and capital accounts.

“Asset quality also continued to improve, while capital adequacy ratios remained above international standards,” it added.

According to the report, the number of banking institutions fell to 696 as of end-December 2012 from the quarter- and year-ago levels of 705 and 726, respectively.

The BSP attributed the decline to the continued consolidation of banks as well as the exit of weaker players in the banking system.

By banking classification, banks consisted of 37 universal and commercial banks (U/KBs), 70 thrift banks (TBs) and 589 rural banks (RBs).

Operating network of the banking system increased to 9,410 in the fourth quarter of 2012 from 9,301 in the third quarter of 2012 and 9,050 during the same period last year, because of the increase in the branches/agencies of U/KBs.

On the other hand, the BSP report also said that the total resources of the banking system rose by 9.3 percent to P8.4 trillion as of end-December 2012 the quarter- and year-ago levels of P7.9 trillion and P7.6 trillion, respectively.

“The increase could be traced to the growth in loans, securities and other equities indicative of the public’s continued trust in the banking system,” the central bank stated.

U/KBs accounted for nearly 90 percent of the total resources of the banking system.

Commercial banks’ outstanding loans continued to grow steadily at double-digit growth rate at 14.7 percent year-on-year by end-March 2013.

Meanwhile, the report added that nonperforming loans (NPL) ratio of the banking system sustained its downward path, easing to 2.5 percent as of end-December 2012 from 2.8 percent in the same period in 2011.

“Banks’ initiatives to improve asset quality along with prudent lending regulations helped bring the NPL ratio to below its pre-Asian crisis level of around 3.5 percent,” the BSP said.

It added the Philippine banking system’s NPL ratio of 2.5 percent is higher compared to Indonesia’s 1.8 percent, Malaysia’s 2 percent, South Korea’s 0.5 percent and Thailand’s 2.2 percent.

“The lower NPL ratios of Malaysia and South Korea were attributed to the creation of publicly owned asset management companies in these countries, which purchased the bulk of their NPLs, a practice not resorted in the Philippines,” the BSP explained.

On the other hand, the report said that banking system’s capital adequacy ratio remained above standards at 17.6 percent as of end-December 2011.

The BSP noted that the industry raised its capital to support an increase in assumed risks, adding that banks either retained earnings or issued capital instruments to match the rise in their risk weighted assets.

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