Banks post bigger capital buffers, but see slower growth of assets, loans

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By Carmina Angelica V. Olano

THE COUNTRY’s biggest banks saw their capacity to absorb risky assets improve in the last three months of 2019, even as aggregate profitability dipped and growth in assets and loans eased.

BusinessWorld’s 4th Quarter Banking Report shows the combined assets of the country’s 46 universal and commercial banks (U/KBs) grew 8.16% to P17.93 trillion from P16.58 trillion in 2018’s comparable three months.

Combined assets of the Philippines’ largest banks reach P17.93 trillion in 2019

The fourth-quarter asset growth was slower than the third quarter’s 9.89% and the 11.44% clocked in 2018’s final three months. The latest reading also marked the slowest growth in U/KBs’ assets since the fourth quarter of 2015’s 5.88% growth.

Bank loans, which make up around half of U/KB assets, grew 9.3% to P9.98 trillion during the quarter from P9.13 trillion the previous year. This is slower than the 15.1% loan growth observed in 2018’s fourth quarter.

In terms of profitability, the 6.75% median return on equity (RoE) was less than the 6.95% in the third quarter. RoE — the ratio of net profit to average capital — measures the amount shareholders make for every peso invested in a company.

In terms of asset size, BDO Unibank, Inc. (BDO) topped the list at P3.15 trillion, followed by Metropolitan Bank & Trust Co. (Metrobank) at P2.47 trillion and the Bank of the Philippine Islands (BPI) at P2.19 trillion.

BDO also issued the most loans at P2.16 trillion, followed by BPI’s P1.47 trillion and Metrobank’s P1.45 trillion.

Among banks with assets of at least P100 billion, Rizal Commercial Banking Corp. posted the fastest asset growth of 18.38% year-on-year. It was followed by Philippine National Bank’s (PNB) 15.99% and UnionBank of the Philippines, Inc.’s 15.64%.

The same three months saw Development Bank of the Philippines (DBP) as the most aggressive lender with a year-on-year loan growth of 32.99%, followed by the Robinsons Bank Corp. with 18.44% and UnionBank with 17.17%.

BDO remained on top in terms of deposits with P2.48 trillion. Land Bank of the Philippines came in second at P1.79 trillion, followed by Metrobank’s P1.72 trillion.

Despite the decline in profitability, U/KBs managed to build up their ability to absorb losses from risk-weighted assets, as their median capital adequacy ratio (CAR) improved to 21.53% in the fourth quarter from 20.03% in the third quarter.

A measure of a bank’s solvency, CAR indicates its ability to absorb losses without having to imperil the funds entrusted by depositors. 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 in proportion to total assets — improved to 0.73% from 0.75% in the preceding quarter.

On the other hand, the banks’ nonperforming loan (NPL) ratio worsened to 1.88% in the fourth quarter from 1.66% in the preceding three months.

As a percent of total assets, foreclosed real and other properties steadied at 0.30% in the fourth quarter.

Banks’ coverage ratio — which is the ratio of the total loan loss reserves to gross NPL — improved to 108.89% during the quarter from 107.97% in the third quarter, enough to cover the entire value of bad loans held by U/KBs as loan loss reserves totaled some P170.45 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.