THE Philippine financial system remained strong and healthy in the first half of 2014 amid lingering market uncertainties brought about by the United States normalization policy and China’s slowdown, the central bank said on Tuesday.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the strong performance of the banking system, which accounts for almost 80 percent of the assets of the financial system, continued to support the Philippine financial system.
The BSP said the banking system “performed beyond market expectations” as its total assets grew 19.3 percent year on year to P10.3 trillion during the period.
However, it said moderate upward movement of domestic interest rates, which resulted in revaluation and mark-to-market losses in banks’ trading books, affected the banks’ net profit in the first six months of 2014.
The banking system’s net profit stood at P63.7 billion at end-June, down 34.7 percent from P97.7 billion recorded in the same period a year earlier.
Nonetheless, the BSP said interest-related revenues continued to support core earnings as the six months to June period also highlighted the changing behavior of banks in response to changing market conditions.
“Despite all these, the performance of the Philippine banking system is still commendable as it is the only banking system out of the Asean-5 and the 65 Moody’s-rated banking systems in the world that earned a positive outlook from the international credit watcher for the next 12 to 18 months,” it said.
Asean-5 refers to the founding economies of the Association of Southeast Asian Nations namely, Indonesia, Malaysia, Philippines, Thailand and Singapore.
As of end-June, the central bank reported that the country had 664 operating banks, 9,456 bank branches, 14,843 automated teller machine units, 328 microfinance banking offices, and 245 banks with e-banking services such as internet, mobile, phone, e-wallet and remittance cards.
“The BSP continued to widen financial access points under a defined financial inclusion strategy,” it added.
Entities with quasi-banking functions and other institutions under BSP jurisdiction also performed generally well for the first half of the year, as key performance indicators for these nonbank financial institutions reflected strong balance sheets and sustained profitability, the central bank said.
Lastly, the BSP said it will remain vigilant to maintain its objective of promoting greater financial stability.
“Notwithstanding the solid performance of the financial system in the first half of 2014, risks arising from ever changing market conditions and emerging regulatory architecture could signal sharp turns and pressure points that may warrant careful monitoring, pro-active supervisory response and calibrated reform implementation,” it said.