Big banks report slower growth in Q1

By Jobo E. Hernandez, Researcher

THE country’s biggest banks reported lower profits, reduced capacity to absorb risky assets, and slower asset growth in the first three months of the year.

BusinessWorld’s latest Quarterly Banking Report showed the combined assets of 41 universal and commercial banks (U/KBs) grew 7.06% to P17.837 trillion in the January-March period, from P16.660 trillion in the same three months of 2019.

The statements of conditions for five U/KBs were not available as of June 9 when the compilation of the financial data was concluded. The five banks are: Australia & New Zealand Banking Group Ltd.; Bank of America; Bank of China; Chang Hwa Commercial Bank Ltd., Manila Branch; and First Commercial Bank Ltd., Manila Branch.

The first-quarter asset growth was slower than the 8.16% recorded in the fourth quarter of 2019 and 10.91% in 2019’s first quarter.

Bank loans, which made up around 55.76% of big banks’ assets last quarter, totaled P9.946 trillion, up 9.73% from last year’s P9.064 trillion. This is faster than the 9.30% year-on-year growth in the previous quarter, albeit slower than the year-ago 12.38%.

In terms of profitability, the median return on equity (RoE) went down to 5.17% from 6.75% in the fourth quarter and 8.05% in 2019’s comparable three months. RoE, which is the ratio of net profit to average capital, measures how well a company makes use of the money from shareholders to generate income. Put another way, it measures the amount that shareholders make on every peso they invest in a firm.

BDO Unibank, Inc. (BDO) retained the top spot among U/KBs in terms of assets, followed by Metropolitan Bank & Trust Co. (Metrobank) and the Bank of the Philippine Islands (BPI).

BDO also issued the most loans in the first quarter at P2.185 trillion, followed by BPI at P1.440 trillion and Metrobank at P1.408 trillion.

Among banks with assets of at least P100 billion, the Development Bank of the Philippines (DBP) posted the fastest asset growth of 20.04% year on year. It was followed by Citibank NA’s 19.26% growth and Asia United Bank Corp.’s 16.93%.

Likewise, DBP saw the fastest growth in loans issued, with a year-on-year rise of 32.43%, followed by Rizal Commercial Banking Corp. with 16.62% and China Banking Corp. with 15.09%.

BDO had the most deposits with P2.576 trillion. Land Bank of the Philippines came in second at P1.828 trillion, followed by Metrobank at P1.714 trillion.

ASSET QUALITY
Meanwhile, the banks’ median capital adequacy ratio — or the ability to absorb from risk-weighted assets — declined to 18.33% in the first quarter from the previous quarter’s 21.53% and the past year’s 18.84%.

Even so, it remains well above the required minimum of 10% set by the Bangko Sentral ng Pilipinas and the international standard of eight percent set under the Basel III framework.

The nonperforming asset ratio — or the nonperforming loans and foreclosed properties in proportion to total assets — rose to 0.86% from 0.73% in the preceding quarter.

Similarly, the nonperforming loan (NPL) ratio of the biggest banks worsened to 1.93% from 1.88% three months prior.

As a percent of total assets, foreclosed real and other properties inched up to 0.31% in the first quarter from 0.30% in the previous quarter.

Banks’ coverage ratio — or the ratio of the total loan loss reserves to gross NPL — was 101.94% during the quarter. This was lower than the 108.89% in the preceding three months, but still enough to cover the entire value of bad loans held by the country’s big banks, with loan loss reserves totaling P191.631 billion.

BusinessWorld has been tracking the financial performance of the country’s U/KBs on a quarterly basis since the late 1980s using banks’ published SOCs.

The full version of BusinessWorld’s quarterly banking report will soon be available for download on www.bworldonline.com.