Number of banking institutions fewer by 32 in first quarter

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported on Friday that the number of banking institutions was fewer by 32 in the first quarter of the year indicating the continued  consolidation of banks as well as the exit of weaker players. In its latest status report on  the Philippine Financial System for the first quarter of 2010, the BSP said the number of  banking institutions fell further to 779 as of end-March this year from a year-ago level of  811.

“Number of banks falls due to mergers and consolidations but operating network  continues to expand,” the BSP said. By banking classification, the BSP said banks consisted of 38 universal and commercial banks, 74 thrift banks, and 667 rural banks. However, the central bank reported that the the operating network including branches of the banking system increased by 188 to 8,663 as of the first quarter of the year from  8,475 during the same quarter last year.

The BSP said the increase reflected mainly the increase in the branches and agencies of  commercial and rural banks. Data showed that the banking system’s total resources  increased by 8.5 percent to P6.4 trillion as of end-March from P5.9 trillion as of end-March last year due mainly to the rise in loans and debt securities accounts. Universal  and commercial banks accounted for almost 90 percent of the total resources of the banking system.

The BSP also reported that bank deposits increased by 8.8 percent to P3.4 trillion as of the first quarter of the year as savings deposits went up by 14.9 percent while demand  deposits or checking accounts rose by 16.2 percent. Time deposits contracted by 4.2  percent during the period.

“Savings and time deposits remained the banks’ main sources of funds,” the BSP said.

Earlier, BSP Deputy Governor Nestor Espenilla Jr. said studies showed that there are still too many universal and commercial banks considering the size of the country’s economy.

“In fact you wouldn’t say that the banking industry in the Philippines is very concentrated  to begin with. Lending agencies even say that the industry is fragmented because for the size of the economy, there is still too many commercial banks at 38,” Espenilla stressed.

The BSP and state-run Philippine Deposit Insurance Corp. (PDIC) have launched a P5- billion incentive scheme to spur mergers and consolidations in the country’s rural banking industry under its Strengthening Program for Rural Banks (SPRB). The PDIC has been pushing for the immediate liquidation of closed banks instead of undergoing  rehabilitation as only four out of 511 closed banks have successfully been rehabilitated. PDIC is currently managing 511 closed banks under receivership and liquidation of which only four have been rehabilitated. Of the 81 banks that were ordered closed by the  Monetary Board, 27 applied for rehabilitation but failed since 2005. Furthermore, PDIC earlier expressed concern that of the total 700 rural banks about 179 were under the  central bank’s prompt corrective action scheme. On the other hand, 103 rural   banks were lacking in capital.

This early, the BSP said it is open to the idea of increasing the P5-billion fund to spur  mergers and consolidations in the country’s rural banking industry. The BSP would contribute P2.5 billion to the common fund while the other half would come from the PDIC.