2nd Quarter Banking Report

By Leo Jaymar G. Uy
Senior Researcher

GROWTH in assets of the country’s biggest banks continued to be robust last quarter, fuelled by these lenders’ aggressive loan expansion.

BusinessWorld’s 2nd Quarter Banking Report shows the combined assets of universal and commercial banks (U/KBs) operating in the country growing 13.93% to P14.01 trillion from P12.3 trillion the past year.

The latest asset growth pace is faster than the 13.41% year-on-year increase in the first quarter of this year and quicker than the 6.5% expansion of the country’s gross domestic product (GDP) in the second quarter. GDP, which is the amount of final goods and services produced in the country, measures the country’s economic performance for a period.

Fuelling asset growth in the second quarter of this year was the 18.38% year-on-year increase in bank loans to P7.116 trillion from last year’s P6.011 trillion. Loans comprise around half of the big banks’ assets.

But banks’ ability to absorb losses eased slightly as their median capital adequacy ratio (CAR) went down to 18.45% in the second quarter from 18.66% in the preceding three-month period. Nevertheless, the ratio remains well above the regulatory minimum of 10% set by the Bangko Sentral ng Pilipinas (BSP) as well as the international standard of eight percent. CAR, which is a measure of a bank’s solvency, indicates its ability to absorb losses without having to imperil funds entrusted by depositors.

In terms of profitability, the median return on equity (RoE) of U/KBs improved to 4.7% in the second quarter of this year from 4.27% in the first three months of 2017. RoE measures the amount that shareholders make on every peso invested in a company.

Asset quality edged down somewhat as the non-performing loan (NPL) ratio of the biggest banks increased to 1.74% in the second quarter from the first quarter’s 1.64%. This, as total bank borrowings increased 4.87% on a quarter-on-quarter basis.

The second quarter marks the last three months under the watch of former BSP chief Amando M. Tetangco, Jr., who was succeeded last July by current BSP Governor Nestor A. Espenilla, Jr.

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

The newspaper’s quarterly banking report ranks banks in terms of the size of their balance sheets. Apart from asset size, the report provides other key ratios to measure bank performance like capital adequacy, earnings and liquidity — all key components of the CAMELS (capital adequacy-assets-management capability-earnings-liquidity- sensitivity) system used internationally in evaluating a lender’s health.