Banking system expands in H1

The banking system grew slightly in the first semester this year, with total assets expanding to P3.33 trillion, from P3.26 trillion at the end of 2001.

The growth in assets was achieved despite a drop in the number of banking institutions – from 7,555 universal, commercial, thrift and rural banks in June last year, to 7,492 this year.

According to the supervisory reports and studies office (SRSO) of the Bangko Sentral ng Pilipinas (BSP), the number of players dropped as a result of mergers, acquisitions, downgrading, downsizing, and repositioning.

"Most of the merger activities occurred within the thrift banking sector. From 104 head offices in end 2001, we are now down to 98 end June this year," BSP assistant governor Nestor Espenilla pointed out.

In terms of branches, the number grew from 1,247 by end December last year to 1,251 as of June this year.

"We have fewer thrift banks now, but more branches. Branch expansion occurred as part of a merger activity, or they put up a thrift bank that is microfinance-oriented. Or in more rare cases, they put up branches in places where there are no thrift banks," Espenilla said.

Also contributing to the reduction in the number of head offices is the downgrading of three thrift banks to rural banks status. They are the Pangasinan Development Bank, the Crown Savings and Loan Bank, and the Cavite Development Bank.

Within the rural banking sector, the number of players dropped from 785 head offices in June last year to 781 by end December to 776 by the middle of this year. But the reverse was again noticed in the case of the sector’s branch network, which grew from June last year to the same period this year.

The BSP official said some rural banks had closed shop although there were a few new players.

"It is minimal as we are also opening new rural banks, but net of opening and net of closures, there was still a net decrease. But you will also notice that the total branch network has slightly increased," Espenilla said.

He added: "The weaker ones were waylaid, the stronger ones opened new branches. That is good for the public and the banking system as it weeds out the weaker players, which offer poor services. The stronger players remain and they are in a position to expand."

The BSP noted that the commercial banking system has been consolidating, with just one entrant – Bank of China.

Some of the commercial banks have closed some of their branches while others have been repositioning thus the numbers have been insignificant. "In other words, practically nothing has happened in the commercial banking sector quantitatively in the past six months."

A case in point for repositioning and rationalization of branches was the merger between the Bank of the Philippine Islands (BPI) and Far East Bank and Trust Co. (FEBTC). There were cases when in one major intersection, there are branches of BPI, BPI Family Bank, and FEBTC.

"First, they (BPI) have to get the branches, then they can reposition some elsewhere. If that is still uneconomical or competitive, they simply close it," the BSP official explained.

The number of head offices of commercial banks remained at 44 since June 2001, although branches decreased from 4,226 in the first six months of 2001 to 4,185 in the same period this year.

Among the significant M & A events that occurred this year was that between the American Express Bank and Omni Savings Bank with the American Express Bank as the surviving entity. The Robinson Savings Bank-the BPI Family Savings Bank-ABN Amro Bank Inc. three-way deal. It resulted in the ABN Amro selling all its branches to Robinsons Savings Bank and BPI Family Savings Bank acquiring all the housing portfolio of ABN Amro, which upgraded to the offshore banking unit (OBU) status.

Planters Development Bank acquired Active Bank in June this year with Planters as the surviving entity thus landing it among the top five thrift banks in the country.