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By Maricel E. Burgonio, Reporter
THE banking industry sustained its profitability
last year despite contractions in trading gains and trust department
income, the Bangko Sentral ng Pilipinas (BSP) said in its Philippine
Financial System report.
Net income of banks grew 9.5 percent to P62.9
billion last year from P57.4 billion in 2006, the report noted .
This was supported by a double-digit expansion in interest income
and fee-based services.
The banks’ total operating income reached P267
billion, the bulk of which consists of net interest income of P168.1
billion from loans and foreign exchange services; operating expenses
that reached P206.5 billion resulting in a net operating income of
P60.5 billion.
Low interest rates encouraged banks to be
aggressive in consumer lending last year, most especially in
targeting the overseas Filipino workers market for housing loans.
But the strengthening of the peso versus the US dollar led to
contraction in trading gains. The peso appreciated 18 percent last
year.
Bank deposits rose to P3.664 trillion from
P3.497 trillion, indicating a much-improved deposit mobilization.
However, the capital position grew modestly by 5.8 percent to P601.8
billion due to the implementation of stricter capital standards
under Basel 2.
Build-up in deposits and capital resulted in
expansion of total assets amounting to P5.133 trillion in 2007 from
P4.865 trillion the previous year.
“The recent global financial market turmoil
brought about by the US subprime crisis highlights the importance of
stringent credit underwriting standards and increased transparency
and disclosure requirements in complex financial transactions,”
BSP said.
Corporate governance protects banks from
potential financial turbulence arising from complex financial
transactions.
In terms of lending growth, the banking industry
expanded 10.9 percent to P2.212 trillion last year despite lower
loan allocations of major recipients of loans.
“The improving macroeconomic environment and
continued upswing in consumer confidence on the back of strong
inflows of overseas Filipinos remittances have led to double-digit
expansion in 2007,” BSP said.
Outside the financial intermediation sector, the
manufacturing sector still had the highest concentration of bank
credit at 15.1 percent to P391.6 billion.
This was followed by real estate, construction,
renting and business activities sector at 12.5 percent or P326.2
billion and wholesale, retail trade and repair of motor vehicle
sector at 10.7 percent or P278.5 billion.
Investments, however, declined by 1.9 percent to
P1.265 trillion due to on-going fiscal consolidation and higher risk
weight on below-investment grade in foreign currency-denominated
government securities under Basel 2.
Meanwhile, the banks’ payables at P415.4
billion were higher than the operating income. The bank industry’s
cost-to-income ratio slightly climbed to 68.3 percent from 66.5
percent due to rising miscellaneous cost. The industry invested in
new risk-based technology, advertising and marketing expenses and
increase in salaries and wages particularly on retirement pays as an
offshoot of industry consolidation.
BSP said more banks seeking higher profits and
better efficiencies under Basel 2 are expected to consolidate over
the medium term.
Recently, the Philippine National Bank and
Allied Banking Corp. as well as China Bank and Manila Bank announced
their merger plans. Prior to this, Banco de Oro and Equitable-PCI
Bank announced their merger in May last year.
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