Thrift banks still relevant, sound

MANILA, Philippines - The thrift banking sector has remained relevant and capable of servicing its niche market.

“Thrift banks remained fundamentally sound. The industry reported stronger balance sheets as indicated by increased deposit generation, steady lending activity and better asset quality,” Pascual M. Garcia III, president of the Chamber of Thrift Banks (CTB), reported. He is also the president and chief executive officer of the Philippine Savings Bank (PSBank).

The thrift banks are composed of savings and mortgage banks, private development banks, stock savings and loan associations.

At the start of the year, only 73 thrift banks were still operating from 77 in 2008, as capitalization requirements forced four to be absorbed by healthier institutions.

This year, some thrift banks will become commercial banks, others join the ranks of rural banks while others will be forced to sell due to capital deficiencies or succumb to competition.

But the number is deceptive as the industry players in general expanded from 1,296 offices and branches to 1,333.

The thrift banking system currently services over 3.4 million deposit accounts. Of the total deposit base, savings banks account for 40 percent, 25 percent by the development banks, 30 percent by the savings and loan associations and the remaining five percent by microfinance-oriented banks.

Total deposits stood at a record P434.21 billion, up by 11.87 percent from the 2008 level. Deposits serviced by the system grew by an average annual growth rate of 13 percent in the past six year starting 2005.

Deposit mix consisted of 87.6 percent of peso deposits while 12.4 percent is filled in dollar deposits. The peso time deposit account represented the largest portion of the deposit base at 54.78 percent or P208.38 billion while the peso savings account is at 33.49 percent or P127.38 billion, and demand deposits at 11.73 percent or P44.62 billion.

Gross loans reached P311.8 billion at the end of 2009, growing by 7.91 percent from the previous P288.93 billion. Over a six-year span, loans grew by an average annual rate of 26.1 percent. Curiously, from 2005 to 2008, loan growth had been in double digits.

Thirty-seven percent of loans were devoted to the mortgage sector, while 23.3 percent represented personal or consumption loans. Another 12 percent were accounted due to financial intermediation while 6.62 percent for wholesale, retail or trade purposes. There rest went to the agriculture sector, manufacturing, transportation, storage and communications, construction health and social works.

Total capital reached P61.85 billion in November 2009, up by 20.18 percent from a year ago level of P51.47 billion.

However, growth of its asset base has been erratic having experienced contractions twice in a six-year period.

It stood at P346 billion in 2005 growing by 27.4 percent the following year to P440.86 billion. It surged forward to PP485.59 billion in 2007 but slipped somewhat by 0.8 percent to P481.7 billion the following year. In 2008, it shrunk further to P478.73 billion but recovered to its record level of P311.8 billion last year.

Data from the Bangko Sentral ng Pilipinas (BSP) show that the industry has been hovering in the nine percent in terms of its past due ratio.

Likewise, official data indicate that its risk-weighted capital adequacy ratio (CAR) has been shrinking from a high of 17.3 percent in 2005 to a low of 11.47 percent last year.