The Philippine financial system remained sound and stable last year amid the challenging global financial landscape, the central bank said.
The Bangko Sentral ng Pilipinas (BSP), however, added that growth of the banking system cooled slightly from a year earlier in terms of profit, foreign currency deposits, and capital adequacy.
In a statement detailing the financial performance of the banking sector in 2015, the BSP said that the financial system continued to provide needed funding to a growing economy with the banking system at its core.
“As the Bangko Sentral ng Pilipinas pursued sustained reforms with financial sector stakeholders, the banking system posted sufficient capitalization, improved asset quality and continued growth in assets, loans and deposit liabilities,” it said.
The central bank stressed that banks’ risk-taking activities and overall operations had manageable impact on capital and profitability.
Universal and commercial banks have sufficient capitalization their current capital adequacy ratio (CAR) at 15.1 percent on a solo basis, lower than the 15.4 percent CAR at end-2014.
Their net profit was relatively stable at P134.6 billion despite tempered trading gains on the back of rising interest rates, it said. This too represented a slight decline from 2014, when the banking sector’s net income reached P134.9 billion.
Lenders’ funding remained largely sourced from retail and peso deposits of residents, while foreign currency deposit liabilities comprised 16.7 percent of total deposit liabilities. This was slightly lower than 2014, when foreign currency deposits accounted for 16.8 percent of total deposits.
The BSP added that banks were generally compliant with the required asset and liquid asset cover ratios of 100 percent and 30 percent, respectively.
Meanwhile, it also reported that the trust industry sustained its growth, albeit modest at P8.1 billion or 0.3 percent to P2.7 trillion.
“The growth was supported by increasing concentration and faster growth in financial assets particularly corporate debt securities over equity investments. Overall dollar-denominated assets propped up the expansion in trust assets,” it stated.
The central bank also noted that foreign bank branches and subsidiaries (FBB) similarly ended 2015 with improved solvency, asset quality and liquidity.
Their profitability was maintained on higher interest income.
It added that new FBBs brought in fresh funds to the Philippine banking system when they commenced operations in 2015.
On the other hand, the BSP said other non-bank financial institutions exhibited prudence in their overall risk-taking activities and provided sufficient capital buffers for unforeseen shocks from their operating environment, for example, rising interest rates.
In particular, it said, non-bank financial institutions with quasi-banking functions (consisting of investment houses and finance corporations) reported positive net profit and sufficient capitalization with borrowings mostly in the form of deposit substitutes.
“Notwithstanding the sustained positive performance of the financial system, the BSP continues to bolster the banking system’s capabilities to address potential risks. This is in line with the BSP’s objective of promoting greater financial stability,” the BSP said.