Big banks, consumer loans expand on improved economic conditions

PHILIPPINE universal and commercial banks (U/KB) continued to grow as economic conditions and credit activity improved amid the ongoing health crisis, the Bangko Sentral ng Pilipinas (BSP) said.

“Key U/KB performance indicators showed a steady rise in assets, loans, and deposits, and sustained profitability with ample credit loss reserves, sufficient liquidity and capital buffers,” BSP Governor Benjamin E. Diokno said at a briefing on Monday.

“The industry remains the prime mover of the Philippine banking system as it holds the lion’s share of the system’s lending at 93.6%, investing at 96.3%, and deposit-taking activities at 94.1% as of end-April 2022,” he added.

Big banks recorded a 26.7% year-on-year growth in their net profit to P61.4 billion as of March 2022 as economic conditions and credit activity improved, the BSP said.

Their assets rose by 8.2% to P19.45 trillion at end-April compared with the P17.98 trillion posted a year earlier. This was mainly driven by deposits, which increased by 8.7% to P15.18 trillion in the same period.

The total loan portfolio of U/KBs grew by 9.8% year on year to P10.7 trillion at end-April. These loans were extended to the real estate, wholesale and retail trade, and manufacturing sectors.

Loans to micro, small and medium enterprises (MSMEs) stood at P334.8 billion as of April, while lending to households, including residential real estate, reached P1.7 trillion.

“With a solid and strong performance, U/KBs provided credit support to the main segments of the economy,” Mr. Diokno said.

“Latest data on alternative compliance with reserve requirements show that the industry allocated an average of P186.6 billion in loans to MSMEs or around a 12% share of the total required reserves for the reserve week ending May 24, 2022. This is a substantial increase from the P7.4 billion in MSME loans, around a 0.6% share, reported in April 2020,” he added.

Loan quality also showed signs of recovery as their nonperforming loan (NPL) ratio — the share of soured loans to the total loan portfolio — eased to 3.6% at end-April from 3.7% as of March and the 3.9% seen at end-2021.

On the other hand, the industry’s NPL coverage ratio rose to 95.2% in April from 87.7% in the same month last year.

“The full implementation of the Financial Institutions Strategic Transfer Act and the extension of effectivity of some of BSP’s credit-related relief measures are seen to provide support to the continued growth in U/KB lending,” the central bank said in a statement.

Republic Act No. 11523, otherwise known as the Financial Institutions Strategic Transfer Act, lets banks sell their nonperforming assets to specialized asset management firms. The law took effect in February 2021.

“Moreover, U/KBs continued to be well-capitalized. They posted risk-based capital adequacy ratios of 16.2% and 16.8%, respectively, on solo and consolidated bases, at end-March 2022. This is well-above the minimum threshold of 10% set by the BSP, and 8% by the Bank for International Settlements,” Mr. Diokno said.

The industry also posted a liquidity coverage ratio of 200.3% on solo basis at end-February 2022, well-above the 100% minimum requirement.

Mr. Diokno said the BSP’s policy priorities for the banking sector for the next two years are “premised on banks’ good corporate governance, effective risk management, and strong financial position.”

These priorities include improving the operational resilience of banks,  continuing to provide a platform that allows technology innovations to flourish while ensuring that consumers are protected, and sustainability.

“The BSP’s promotion of digital transformation and sustainable finance reinforces BSP’s thrust for financial inclusion. This fundamentally involves increasing access of the unbanked and underserved to financial products and services, while protecting vulnerable segments of the society,” the central bank chief said.

CONSUMER LOANS GROW
Meanwhile, consumer loans granted by universal, commercial and thrift banks grew 0.7% year on year to P1.97 trillion at end-March following four consecutive quarters of contraction in 2021.

“This growth came largely from residential real estate loans, credit card receivables, and salary-based general-purpose consumption loans. These outpaced the declines in motor vehicle loans and other consumer loans,” Mr. Diokno said.

“The improved outlook is due to expectations of availability of more jobs and permanent employment, additional and high income, and effective government policies and programs, such as the easing of quarantine restrictions, availability and rollout of vaccines, and provision of financial assistance,” he added.

Residential real estate loans accounted for the largest share of consumer loans at 44.6% in March. This was followed by credit card receivables at 22.7% and motor vehicle loans at 22.6%. — K.B. Ta-asan