RBs outdid KBs, TBs last year

Rural banks have actually outperformed its richer cousins in the country’s banking system in terms of mobilizing deposits, extending credits and managing asset quality, according to a government agency.

The Philippine Deposit Insurance Corp. (PDIC) pointed out that deposits of the rural banks (RBs) grew by 14-percent last year from P54.8 billion in 2002 to P62.2 billion. The banking industry average growth in deposits was a mere 6.5-percent in that period.

"Stronger deposit base, less reliance on borrowings, and reduced cost of funds to finance lending operations enabled rural banks to extend much needed financing to priority sectors," Ricardo M. Tan, PDIC president and chief executive officer said.

Rural banks mobilized the savings of the rural folks to finance the productive endeavors of the countryside.

The deposits generated come from small savers, with 90-percent of the depositors have balances of P15,000 and below.

Tan said that the rural banks‚ high interest spread coupled with increase in operating income translated to a collective net income of P1.5 billion last year, or a 33-percent growth from earnings in 2002.

Return on equity (ROE) grew to 11-percent from nine percent while return on assets (ROA) improved to 1.7 percent from 1.5 percent, exceeding industry average figures.

Loans grew by 10-percent from P50.8 billion in 2002 to P56-billion last year unlike commercial and thrift banks which reflected restraint in lending.

The loans were channeled mostly to agriculture, transportation and communications, while trade and private households reflected growing levels of financing from the RBs.

The Bangko Sentral ng Pilipinas (BSP) balance sheet structure of Philippine banks show the rural banks have allocated most of their generated resources to lending, that is, 59.5 percent as against 49.1 percent of commercial banks and 49.8 percent of the entire banking system.

In 2002, the rural banking system lent out a total of P50.8 billion nationwide. Luzon was a recipient of almost 71 percent of the loans, followed by Mindanao at almost 18 percent and Visayas at almost 12 percent.

Meanwhile, Tan said that the non-performing loans (NPLs) of the rural banks declined by 23 percent from P8.6 billion in 2002 to P6.6 billion last year. Acquired assets dropped b y one percent.

"The amount of acquired assets disposed may not be substantial but RBs are set on the right direction by steadily removing non-performing assets (NPAs) from its books through effective collection, remedial and disposition measures. With the 10-percent increase in capital, the ability of capital to cover for NPAs strengthened to 83-percent. Nevertheless, RBs should step up provisions for losses currently set at 21 percent of NPAs in 2003, to be at par with the industry average of 33 percent," the PDIC chief added. – TPT