PHL big banks post slower growth in assets, loans in 2nd quarter

By Abigail Marie P. Yraola, Deputy Research Head

THE GROWTH in combined assets and loans of the country’s biggest lenders eased as of end-June, dragged by weaker economic output in the second quarter despite cheaper borrowing costs and slower inflation.

The latest edition of BusinessWorld’s quarterly banking report showed that the aggregate assets of 44 universal and commercial banks grew by 9.05% year on year to P27.37 trillion in the second quarter from P25.09 trillion a year earlier.

This pace was slower than the 9.51% logged in the first three months of the year and the 10.7% growth in the second quarter of 2024.

Asset growth during the period was the weakest in five quarters or since the 8.69% expansion recorded in the first quarter of 2024.

Meanwhile, the aggregate loans of the country’s biggest lenders went up by 12.38% year on year to P14.4 trillion in the April-to-June period.

This expansion was slower than the 13.46% recorded in the first quarter and the 14.01% growth in the second quarter of last year.

Lending growth was also the weakest in the five quarters or since the 12.32% observed in the first three months last year.

This modest growth in both assets and loans mirrored economic developments such as slowing economic growth and benign inflation.

In the second quarter, the country’s gross domestic product (GDP) expanded by an annual 5.5%, slower than the 6.5% growth in the same period last year but slightly faster than the 5.4% expansion in the January-to-March period.

This brought GDP growth to 5.4% in the first semester, slowing from 6.2% a year earlier.

Meanwhile, inflation in June picked up to 1.4%, a tad faster than the 1.3% in May. Still, this was slower than the 3.7% in June last year.

For the first half, inflation averaged 1.8%, decelerating from the 3.6% average in the first six months of 2024.

At its June meeting, the Bangko Sentral ng Pilipinas (BSP) delivered a 25-basis-point rate cut to bring its key rate to 5.25% — the lowest level in two and a half years.

Data also showed the share of bad loans to the total loan portfolio, also known as the nonperforming loan ratio, jumped to 3.39% in the second quarter. This was higher than the 3.25% a year earlier and 3.24% in the first quarter.

Loans are considered nonperforming if any principal and/or interest are left unpaid for over 90 days from the contractual due date or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement.

Meanwhile, the banks’ median return on equity (RoE), which is an indicator of profitability, dipped to 7.69% in the second quarter from 8.93% in the second quarter of 2024. The RoE measures the amount that shareholders make on every peso they invest in a company.

Additionally, the largest banks’ median capital adequacy ratio — which reflects the lender’s ability to absorb losses from risk-weighted assets — stood at 19.18% during the period.

This was higher than the 18.8% recorded in the same period last year but lower than the 19.71% a quarter earlier.

The ratio remained well above the regulatory minimum of 10% set by the BSP as well as the international minimum standard of 8% under the Basel III framework.

The leverage ratio, which gauges the institution’s ability to absorb shocks by measuring the bank’s capital relative to total exposure, stood at a median of 11.39% as of end-June. The current figure exceeded the central bank’s 5% guideline as well as the international standard of 3%.

Meanwhile, the net interest margin (NIM) of these big banks hit 4.23%, higher than the 3.19% a year earlier.

NIMs are an indicator of banks’ investing efficiency by dividing annualized net interest income by average earning assets.

During the period, the return on assets, which measures the profit generated per peso of an asset, rose to 1.62% from 1.42% in the second quarter of 2024.

In the April-to-June period, BDO Unibank, Inc. (BDO) remained the largest bank in terms of total assets with P5.05 trillion, followed by Metropolitan Bank & Trust Co. (Metrobank) with P3.51 trillion and Bank of the Philippine Islands (BPI) with P3.5 trillion.

In lending, the Sy-led bank also led the industry with P3.41 trillion worth of loans issued, followed by Bank of the Philippine Islands (BPI) with P2.36 trillion and Metrobank with P1.85 trillion.

In terms of deposits, BDO led with P4.03 trillion in deposits, followed by Land Bank of the Philippines (LANDBANK) with P3.06 trillion and BPI with P2.61 trillion.

Among banks with at least P100 billion assets, Security Bank Corp. posted the fastest year-on-year asset growth with 25.6%, followed by Bank of Commerce (17.8%), and The Hongkong & Shanghai Banking Corp. Ltd. (16.6%).

On the other hand, Asia United Bank was the most aggressive lender with a year-on-year growth of 35.57%, followed by China Banking Corp., with 18.04% and Philippine Trust Co., with 16.31%.

BusinessWorld Research has been tracking the financial performance of the country’s large banks quarterly since the late 1980s using banks’ published statements.