Banks’ performance beats last year’s results

BANKS, insurance firms, and other financial companies posted higher output in 2016 in large part due to increased lending activities.

Data from the Philippine Statistics Authority showed that the gross value added (GVA) of the financial intermediation sector increased by 7.6% to P588.17 billion last year, outpacing the 6.06% growth in 2015.

Among the subsectors, banking institutions — which accounted for a chunk of the sector’s total output at 45.4% — posted the highest improvement in GVA at 9.2% to P267.26 billion last year. It was followed by other financial firms doing “activities auxiliary to financial intermediation” which grew by 7.4% to P32.30 billion and making up 5.5% of the sectoral total.

For its part, the insurance subsector saw its GVA rise by 7.2% to P101.08 billion while non-bank financial intermediation increased by 5.6% to P187.53 billion. The insurance and non-bank financial intermediation sectors, respectively, make up 17.2% and 31.9% of the sectoral total.

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The year 2016 was a good one for the Philippine banking industry as it was able to book a record profit during the year on the back of higher deposits and loans while having a lower share of soured debts from a year ago.

Cumulative bottom line among banks was P154.13 billion, 13.9% higher than the P135.34 billion recorded in 2015, according to data from the Bangko Sentral ng Pilipinas (BSP). In particular, universal and commercial banks (UK/Bs) accounted for the bulk of the amount with a P136.96-billion income, up 13.9% from the P120.28 billion in 2015.

Consumer loans continue to be the banks’ bread and butter with UK/Bs and thrift banks having lent P1.27 trillion in consumer loans to households last year, which was 19.9% higher than the P1.06 trillion recorded in the year prior. Loans booked for housing lots was up 17.1% to P519.90 billion, while motor vehicle loans increased by 27.8% to P388.36 billion last year due to increased demand for private transport and flexible payment options offered to buyers.

Consumer credit is widely expected to rise further amid the optimism arising from the government’s infrastructure push with big-ticket projects on the pipeline.

On the other hand, the insurance industry’s total premium income was flat last year according to quarterly reports submitted by the life and non-life insurance companies to the Insurance Commission. The industry’s total income from premiums for 2016 was P231.88 billion which was up 0.3% from 2015 — below the targeted P280 billion-P300 billion worth of premiums for the year.

The life insurance sector’s total premiums was down 3.0% in 2016, which was attributed to the decline of premium production in variable life insurance products which were allocated in the Philippine stock market.

Non-life insurance companies absorbed some of the losses as their net premium incomes grew 16.2% for the year. — Christine Joyce S. Castañeda