Bank deposits continued to grow

According to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest NewsBriefs, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said that the central bank’s policy rate reductions is reflected further in the form of lower bank lending rates as risk aversion has subsided. Lending rates have fallen by about 110 to115 basis points since December, which represents 60% of the BSP’s policy rate reductions.

Furthermore, it was reported that the public continues to entrust the local banks as deposits continued to grow in May. Peso-dominated deposits in local banks grew by 14.8% to Php3.1 trillion as of May from Php2.7 trillion a year ago. Growth in deposits gives banks more money to lend to the public, which could stimulate economic growth. Economic managers have set a Php657.79 billion revenue target for the second half of 2009 amid expectations of higher growth and the efficacy of tax administration measures. The target is 20.54% higher than the first semester Php545.7 billion collection. In the same period last year, the revenue collection was Php632.9 billion.

       Moreover, inflation fell to a 22-year low in July with a rate of 0.2% as price increases continued to slow. The July figure is down from June’s 1.5% and was the lowest since March 1987’s 0.6%. National Economic and Development Authority policy planning director Dennis Arroyo said that the lower inflation rate may be due base effects. In line with this, following a reduction in generation charges, Manila Electronic Company (Meralco) bills will go down this August due to lower rates of National Power Corporation. Movement in this charge reflects adjustments in the cost of power Meralco obtains from its suppliers, which is then passed on to consumers.

Likewise, according to the same report, the Philippine Chamber of Commerce and Industry supports the government’s policy of allowing foreign investments in the country’s big plantations as long as the investors do not violate Philippine laws. These foreign investments in agriculture were said to bolster the country's food exports. Also, according to IDEA, the country’s fourth and fifth largest banks reported a surge in their first half net income citing higher earnings from loans. State-run Land Bank of the Philippines, the country’s fourth largest bank, said it earned Php3.58billion for the first six months, 40% more than the Php2.56 billion earned in the same period from a year ago. Meanwhile, the Philippine National Bank said its net income totaled Php1.53 billion in the first half an 88% growth from a year ago.

However, it is unfortunate that FBMA Marine Inc., a Cebu-based sea vessel and utility crafts maker, has ceased operations owing to the effects of the global economic slowdown. FBMA Marine initially laid off close to half of its workforce in May due to lack of orders for the fast crafts.

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