Bank assets up 9% to P7.1T

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported Tuesday that the assets of the country’s banking sector grew by nine percent in the first four months of the year on the back of public’s continued confidence in the financial system.

Data released by the central bank yesterday showed that the banking sector’s total resources amounted to P7.076 trillion from January to April this year or P586 billion higher than the P6.49 trillion registered in the same period last year.

Assets of universal and commercial banks accounted for about 89 percent of the total resources while thrift, savings, and rural banks cornered the remaining 11 percent.

The BSP reported that resources of universal and commercial banks increased by 9.5 percent to P6.306 trillion in the first four months of the year from P5.76 trillion in the same period last year.

The bank regulator said bank deposits continue to fuel the growth in the industry’s total resources reflecting sustained depositor confidence in the country’s banking system.

Total resources of the country’s banking sector went up by 7.5 percent to P6.421trillion in 2009 from P5.973 trillion 2008 as the industry remained stable and stable despite the global financial crisis.

Banks operating in the Philippines managed to keep their capital levels significantly above international standards after major players in the banking industry successfully raised fresh equity through the issuance of various debt instruments.

The BSP said that the capital adequacy ratios (CARs) of the banking system remained healthy at 16.02 percent on solo basis and 16.97 percent on a consolidated basis as of end-December 2010. Similarly, the Tier 1 capital ratios of the banking system remained high at 13.64 percent on a solo basis and 13.69 percent on a consolidated basis.

The banking system’s CARs hardly moved from the last quarter’s 16.04 percent on a solo basis and 16.97 percent on a consolidated basis. The CAR is a ratio of a bank’s capital to its risk and the central bank tracks this indicator to ensure that banks have the capability to absorb a reasonable amount of loss and that they are complying with their statutory capital requirements.

The levels continued to exceed the central bank’s 10-percent minimum requirement and the international benchmark ratio of 8.0 percent under the Basel Accord.

Earlier, Fitch Ratings said it believes that Philippine banks have enough “firepower” to survive the negative impact of the fragile economic growth in the United States and the debt crisis in Europe.

Ambreesh Srivastava, senior director and head of financial institutions in South Asia of Fitch Ratings, earlier told reporters that the impact of what is happening in the US and Europe on Asian economies including the Philippines would put some pressure on the performance of the banking industry.

“This will likely result to a moderation in the performance of the banks,” Srivastava stressed.

He pointed out that banks generated historically high profitabilities in 2009 and 2010 after their Return on Average Assets were driven by their treasury profits on the back of record low interest rates.

“But clearly interest rates will not likely stay at the levels that we have. Some have started tigthening their monetary policy,” he added.

In the case of the Philippines, the BSP has raised key policy rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid escalating oil prices in the world market. This brought the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.

The twin action was followed by an increase in the reserve requirement for banks to 20 percent from 19 percent to siphon off at least P38 billion from the financial system to curb additional inflationary pressures arising from excess liquidity.

However, he explained that the economic uncertainties in advanced economies led by the US and the debt crisis in Europe would not have direct impact on Asian banks unless the slowdown in growth rates would be considerable.