Loans continue to fuel banks’ 4th quarter double-digit asset growth

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By Lourdes O. Pilar

FOURTH-QUARTER growth in the assets of the country’s biggest banks continued to post double-digit growth from the previous year, with loans increasing by nearly a fifth and asset quality still above regulatory minimum levels.

BusinessWorld’s 4th Quarter Banking Report shows the combined assets of the country’s universal and commercial banks (UK/Bs) grew 11.5% to P14.88 trillion from the P13.35 trillion recorded in 2016’s comparable three months.

The fourth-quarter 2017 growth pace was slower than the 14.1% expansion in the third quarter as well as the 12.94% clocked in 2016’s final three months. Nevertheless, total asset growth remained faster than the country’s 6.6% fourth-quarter overall economic expansion.

Bank loans, which comprised 53% of the big banks’ assets, grew 18.5% to P7.93 trillion from P6.69 trillion in the fourth quarter of 2016.

In terms of profitability, UK/Bs’ median return on equity (RoE) improved to 5.7% from 4.7% in the third quarter of this year. RoE — the ratio of net profit to average capital — measures the amount shareholders make on every peso invested in a company.

BDO Unibank, Inc. (BDO) continued to be the biggest bank in terms of assets, followed by Metropolitan Bank & Trust Co. (Metrobank) and the Bank of the Philippine Islands (BPI).

They were also the banks that issued the most loans during the period, also in that order.

Among banks with assets worth at least P100 billion, Robinsons Bank Corp. posted the fastest growth in assets and bank loans in the fourth quarter at 34.9% and 48.5%, respectively.

In terms of deposits, BDO had the most money with P2 trillion, followed by BPI and Metrobank.

In terms of growth, Robinsons Bank saw the biggest increase in its deposit base at 42.2% followed by Asia United Bank (22.9%) and Security Bank Corp. (19.2%).

Banks’ median capital adequacy ratio dipped to 17.2% in the fourth quarter from the third quarter’s 17.6%.

Nevertheless, the ratio remains above the regulatory minimum of 10% set by the Bangko Sentral ng Pilipinas as well as the international standard of eight percent.

Meanwhile, the non-performing loans (NPL) ratio of the biggest banks improved to 1.42% compared to the third quarter’s 1.61%.

The non-performing assets ratio — a measure of bank health that combines NPLs, foreclosed properties and total assets — likewise improved to 0.53% from 0.59% in the third quarter and 0.56% in the fourth quarter of 2016.

As a percent of total assets, foreclosed properties remained steady at 0.35% compared to the third quarter and lower than the previous year’s 0.39%.

The banks’ NPL coverage ratio — the ratio of the total loan loss reserves to gross NPL — stood at 149.4% last quarter.

This was higher than 136.1% in the preceding three months, but was still enough to cover the entire value of bad loans held by the UK/Bs.

Loan loss reserves totaled P145.7 billion, 7.37% more than a year ago.

Biggest Banks

BusinessWorld Research has been tracking the financial performance of the country’s UK/Bs on a quarterly basis since the late 1980s using banks’ published statements of condition.