THE THIRD QUARTER saw the country’s biggest banks post the fastest asset growth since the start of the coronavirus pandemic, while aggregate loans rose for the first time in a year.

The latest edition of BusinessWorld’s quarterly banking report (see S4) showed the combined assets of 44 universal and commercial banks (U/KBs) expanded by 8.97% to P19.822 trillion in the July-September period, from P18.190 trillion in the same three months of 2020.

The third-quarter asset growth performance marked the fastest in eight quarters, or since the year-on-year expansion of 9.89% recorded in the third quarter of 2019.

Big banks’ asset growth picks up pace as loans recover

Meanwhile, aggregate loans in the third quarter grew by 3.24% to P9.739 trillion, a reversal of the year-on-year declines of 5.6% and 0.74% in the second quarter of 2021 and the third quarter of 2020, respectively.

The loan growth in the three months to September snapped four straight quarters of decline.

The median return on equity (RoE), which is an indicator of profitability, improved to 3.36% in the third quarter from 2.77% in the preceding quarter. However, this was still lower than the 4.13% RoE in the third quarter of last year.

Bad loans, also known as nonperforming loans (NPL), rose by 2.8% to P400.08 billion from P389.16 billion in the second quarter of 2021. Compared with the third quarter of 2020, NPLs went up by 39.5%.

This brought the NPL ratio, or the portion of bad loans to the total loan portfolio to 4.49% in the third quarter, slightly less than the 4.67% in the second quarter of 2021 but still higher compared with last year’s 3.57%.

Loans are considered to be nonperforming once they are left unpaid at least 30 days beyond the due date. They pose a risk to the lenders’ asset quality as borrowers are likely to default on these debts.

Likewise, the U/KBs’ nonperforming asset (NPA) ratio — or the NPLs and foreclosed properties in proportion to total assets — was 1.43%, lower than the previous quarter’s 1.46%, but higher than last year’s 1.24%.

Relative to total assets, foreclosed real and other properties stood at 0.26%, roughly the same from the second quarter. This was, however, a tad lower compared with the 0.29% posted in the third quarter of 2020.

Total loan loss reserves reached P353.525 billion during the period, bigger than the preceding quarter’s P338.535 billion and last year’s P294.805 billion.

The big banks’ median capital adequacy ratio — or the ability to absorb losses from risk-weighted assets — stood at 20.80%. This was lower than the 22.34% in the second quarter of 2021 and 21.02% in the third quarter of 2020 but remained above the required minimum of 10% set by the Bangko Sentral ng Pilipinas and the international standard of 8% set under the Basel III framework.

BDO Unibank, Inc. remained the biggest bank in terms of assets with P3.487 trillion, followed by Land Bank of the Philippines (LANDBANK) with P2.902 trillion and Metropolitan Bank & Trust Co. (Metrobank) with P2.438 trillion.

The three banks also had the most deposits with P2.736 trillion for BDO, P2.557 trillion for LANDBANK, and P1.852 trillion for Metrobank.

BDO issued the most loans with P2.233 trillion, while Bank of the Philippine Islands and Metrobank came in at second and third with P1.382 trillion and P1.147 trillion, respectively.

Among U/KBs with assets of at least P100 billion, LANDBANK posted the fastest year-on-year asset growth with 28.41%, followed by the Bank of Commerce (25.13%) and Rizal Commercial Banking Corp. (19.71%).

LANDBANK also saw the quickest growth in loans during the period with 19.53%, along with the Development Bank of the Philippines’ 16.55% and Robinsons Bank Corp.’s 15.46%.

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

The statements of conditions of two U/KBs were not available as of Nov. 26 when the compilation of the financial data was concluded. The two banks are Bank of China Ltd. and Mega International Commercial Bank.

The full version of BusinessWorld’s quarterly banking report will soon be available for download at — Bernadette Therese M. Gadon