PHL banks managed to grow amid uncertainties last year

THE local banking system managed to grow in terms of assets and deposits in 2021, amid uncertainty surrounding the pandemic last year.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the Philippine banking system sustained its “solid footing” as evidenced by the continued growth in assets, loans and deposits as well as ample capital, liquidity buffers and loan loss reserves.

Diokno said that total banking system assets posted an annual 7-percent growth to P20.4 trillion as of end-November 2021. Asset expansion was primarily funded by deposits, which increased by 9.2 percent year-on-year to P15.8 trillion over the same period.

Credit activity also showed signs of recovery as loans rose 4.3 percent as of end-November 2021, reversing a 0.1 percent contraction a year ago.

The BSP governor attributed the improvement in loan activity to favorable market outlook, rising vaccination coverage in the country and the monetary officials’ credit-related relief measures.

“This indicates the continued trust and confidence of the public in the banking system. The strong performance of the banking system amid this crisis is due to its strong fundamentals supported by deep financial sector reforms,” Diokno said.

“The BSP’s timely and well-calibrated operational and prudential relief measures proved instrumental in helping banks cope with the impact of the Covid-19 pandemic,” the central bank governor added.

Diokno also said the level of non-performing loans (NPLs) also remained “manageable” and within the BSP’s expectations.

As of end-November 2021, gross NPL ratio stood at 4.3 percent. While this is higher than the 3.8 percent ratio from a year ago, it is lower than 4.4 percent in October 2021. Diokno said with the still-elevated NPLs, banks’ reserves were “sufficient,” with an NPL coverage ratio of 87.1 percent.

Also, as of end-September 2021, the capital adequacy ratio of the universal and commercial bank industry further improved to 16.9 percent and 17.4 percent on a solo basis and on a consolidated basis, respectively. These figures are well-above the 10 percent regulatory minimum required by the BSP and the 8 percent by the Bank for International Settlements, the BSP said.