Banks' resources rise 14% to P5.9 trillion in January-February

MANILA, Philippines – The total resources of the local banking sector went up by 13.5 percent to P5.9 trillion in the first two months of this year from P5.2 trillion a year ago, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said the rise in the industry’s total resources resulted mainly from the continued rise in the cash and loan accounts of banks.

The BSP said universal and commercial banks accounted for almost 90 percent of the total resources of the banking system, lending out to both corporate and individual borrowers as the central bank released over P500 billion in liquidity since the onset of the financial crisis in 2008.

However, the BSP said the number of banking institutions also continued to shrink, with the total number of head offices falling to 818 at the end of 2008.

The BSP said the decline was due to the continued consolidation of the industry as well as the shut-down of weaker players in the banking system, particularly among rural banks.

But the BSP said that its latest available figures indicated a sustained improvement in the banking system’s asset quality as the non-performing loan (NPL) ratio eased further to 4.3 percent as of end-February 2009 compared to 5.1 percent a year ago.

The BSP said the lower NPL ratio was due to the 6.7 percent decline in NPLs complemented by the 12.7 percent expansion in the industry’s total loan portfolio.

“The Philippine banking system’s NPL ratio of 4.3 percent was at the same level as Indonesia but comparatively higher than those of other countries like Thailand’s 2.9 percent, Malaysia’s 2.2 percent and Korea’s 0.6 percent,” the BSP reported.

Even then, the BSP said the lower NPL ratios in Malaysia and South Korea could be traced to the creation of publicly-owned asset management companies (AMCs) when the 1997 crisis hit Asia.

These AMCs purchased the bulk of the bank NPLs in these countries – something that the government did not have the resources to do after the Asian financial crisis.

But the BSP said it had a significant comfort-level about the health of the banking sector, with its loan exposure remaining adequately covered as the banking system’s NPL coverage ratio was steady at 84.3 percent as of end-February 2009.

“This reflected banks’ diligent compliance with the loan-loss provisioning requirements of the BSP to ensure adequate buffers against unexpected losses,” the BSP said.

The banking sector has been leading the steady growth in the total resources of the entire financial system whose resource base rose 10 percent to P7.284 trillion at the end of 2008 from P6.613 trillion in 2007.