THE Philippine financial system expanded at a double-digit rate in 2014 and demonstrated a “responsive, responsible and remarkable performance”, the central bank said in a status report released on Tuesday.
According to the Bangko Sentral ng Pilipinas (BSP), the country’s financial system last year expanded by 12 percent on double-digit growth in loans (19.5 percent) and portfolio investments (13.3 percent) with stable funding from domestic (98.8 percent) retail deposits which similarly grew by 12.1 percent year-on-year.
Despite the robust expansion, the quality of banks’ credit underwriting standards and commitment to asset cleanup are still on point as the gross non-performing loan (NPL) ratio further eased to 2.3 percent from 2.8 percent in 2013, it said.
“This is 1.7 percentage points lower from the pre-1997 Asian Financial Crisis level of around 4 percent and a significant turnaround from the peak of 16 percent during the Oil Crisis in 2001,” the BSP said in a statement.
Meanwhile, loan loss coverage ratios for NPLs and non-performing assets (NPA) were kept at 119.8 percent and 77 percent, respectively.
There was also ample liquidity in the system for further expansionary credit as the liquid assets-to-deposit ratio rose to 55.6 percent in 2014 from 59.5 percent a year earlier, it said.
Banks’ capitalization remained strong as the capital adequacy ratio (CAR) stood at 15.4 percent on a solo basis and 16.2 percent on a consolidated basis.
The BSP also noted that besides stronger balance sheets, banks reported a positive bottom line as net profit—although growth dipped by 6.9 percent—reached P135 billion from P144.9 billion in 2013, driven by the small but palpable shift in non-interest based revenues, particularly of trading income.
“Domestic banks are intrinsically stronger and more profitable compared to their foreign counterparts,” it said.
As of end-2014, the BSP said the country has 648 operating banks, 9,700 bank branches, 15,695 automated teller machines, 517 microfinance banking offices, and 271 banks with e-banking services such as internet, mobile, phone, e-wallet and remittance cards.
“The BSP continues to widen financial access points under a defined financial inclusion strategy,” it said.
With this, the BSP stressed that international credit watchers and market analysts consider the Philippine banking system as one of the strongest in the region as it is currently the only banking system out of the 69 rated banking systems in the world that received a positive outlook from Moody’s in 2014.
The country’s financial freedom score also improved by 10 notches on the continuing modernization and liberalization of the banking system with the removal of limits to foreign bank entry in 2014 against the backdrop of an efficient regulatory environment, it added.
“Notwithstanding the solid performance of the financial system in 2014, the BSP continues to closely monitor potential pressure points. This is in line with the BSP’s objective of promoting greater financial stability,” it concluded.