Banks mark Q4 with bigger returns despite slower loan growth

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By Leo Jaymar G. Uy
Research Head

FOURTH-QUARTER growth of assets and loans of the country’s biggest banks continued to post double-digit rates even as they recorded smaller increases than year-ago levels.

BusinessWorld’s 4th Quarter Banking Report shows the combined assets of the country’s 45 universal and commercial banks (UK/Bs) grew 11.4% to P16.58 trillion from P14.88 trillion in 2017’s comparable three months.

Fourth-quarter growth was faster than the third quarter’s 9.87% but was slightly slower than the 11.5% clocked in 2017’s final three months.

Bank loans, which make up around half of UK/B assets, grew 15.13% to P9.13 trillion during the quarter from P7.93 trillion the previous year. This is slower than the 18.5% loan growth observed in 2017’s fourth quarter.


In terms of profitability, the median return on equity (RoE) on these big banks improved to 5.36% from 4.82% in the third quarter. RoE — the ratio of net profit to average capital — measures the amount shareholders make on every peso invested in a company.

In terms of asset and loan size, BDO Unibank, Inc. (BDO) topped the list, followed by Metropolitan Bank & Trust Co. (Metrobank) and the Bank of the Philippine Islands (BPI).

Among banks with assets of at least P100 billion, Asia United Bank Corp. (AUB) posted the fastest asset growth of 19.01% year-on-year. It was followed by Philippine National Bank’s 17.35% and Rizal Commercial Banking Corp.’s 17.13%.

The same three months saw the Land Bank of the Philippines (LANDBANK) as the most aggressive lender, with year-on-year growth of 33.77%, followed by the Development Bank of the Philippines with 22.51% and AUB with 19.49%.

In terms of deposits, BDO had the most money with P2.42 trillion, followed by LANDBANK’s P1.66 trillion and BPI’s P1.59 trillion. AUB saw the fastest growth in deposits with 21.12% followed by Security Bank Corp.’s 18.35% and LANDBANK’s 16.7%.

Meanwhile, banks’ median capital adequacy ratio — or the ability to absorb losses from risk-weighted assets — improved to 17.89% in the fourth quarter from the third quarter’s 16.85%.

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

Nonperforming asset ratio — nonperforming loans and foreclosed properties as a percentage of total assets — improved to 0.63% from 0.66% three months prior.

On the other hand, the nonperforming loan (NPL) ratio of the UK/Bs worsened to 1.45% in the fourth quarter from 1.40% in the preceding three months.

As percent of total assets, foreclosed real and other properties fell to 0.31% from 0.33%.

The banks’ coverage ratio — which is the ratio of the total loan loss reserves to gross NPL — was 130.64% during the quarter.

This was lower than the 152.27% recorded in the preceding three months but still more than enough to cover the entire value of bad loans held by big banks, with loan loss reserves totaling some P148.298 billion.

Since 1987, BusinessWorld has been tracking the quarterly performance of the country’s largest lenders based on their published statements of condition.

The report ranks these lenders in terms of the size of their balance sheet and presents other key ratios used in measuring bank performance, such as capital adequacy, earnings and liquidity.

This issue also marks the entry of Chang Hwa Commercial Bank, Ltd. and CIMB Bank Philippines, Inc. on the list after starting operations on July 9 and Dec. 3, 2018, respectively.