Philippines financial system sustains resilience in H1

MANILA, Philippines — The country’s financial system exhibited sustained resilience and supported economic activity in the first half, according to Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr.

Based on the Report on the Philippine Financial System for the first semester, Remolona said the banking sector still dominated the financial system.

“The overall key performance indicators of the Philippine financial system and the domestic banking system show that this sector continues to be a source of strength for the Philippines, capable of meeting the demands of a growing digital and sustainable economy,” Remolona said.

The industry sustained resilience and stability with a strong balance sheet, profitable operations, sufficient capital and liquidity buffers, and ample provision for probable losses.

Banks’ assets increased by 9.1 percent to P23.3 trillion in end-June this year from a year ago, faster than the 7.8 percent increase recorded last year.

These were largely channeled into loans, at 52.8 percent, and mainly financed by deposits.

The industry’s loan book grew by 8.8 percent to P12.7 trillion as the full reopening of the domestic economy improved the credit climate.

As of end-June, the non-performing loan ratio was low at 3.4 percent, while the NPL coverage ratio was high at 101.7 percent.

The BSP is confident that the NPLs of the banking system will stay manageable, owing to banks’ prudent credit standards and robust risk governance framework.

Deposits went up by 8.1 percent to hit P17.8 trillion in end-June, indicating the continued trust of the public in the banking sector, as resident transactions helped keep deposits stable.

Amid growing resources, deposits and earnings, Philippine banks remain well capitalized and highly liquid, with a capital adequacy ratio and key liquidity ratios exceeding the BSP regulatory and international standards.

As of end-March, the capital adequacy ratio (CAR) of the banking system stood at 16 percent and 16.6 percent on solo and consolidated bases, respectively. The levels are well above the minimum thresholds set by the BSP and the Bank for International Settlements.

Likewise, based on the results of the latest stress test exercises, the banking system’s post-shock CAR would remain above the regulatory minima under assumed scenarios, including a possible shock in the property market.

Furthermore, the universal and commercial banking industry’s solo liquidity coverage ratio and net stable funding ratio stood at 183.1 percent as of end- June, well above the 100-percent minimum threshold set by the BSP.

Similarly, the minimum liquidity ratios of stand-alone thrift banks, rural banks and cooperative banks surpassed the 20-percent minimum requirement.

The operations of the banking system remained profitable, with a net income growing by 27.7 percent to P182.8 billion in the first half amid challenging economic conditions.

Moving forward, the BSP is steadfast in ensuring that the Philippine financial system is safe and sound, in keeping with its financial stability mandate.

The regulator vowed to continue collaborating and closely working with relevant stakeholders in the adoption of key financial sector reforms aimed at ensuring institutional stability, promoting responsible innovation and advancing sustainability in the financial system.