Mergers noted in rural banking sector

To cope with the weak economic activity and increasing bad debts, 19 rural banks have sought the approval of the Bangko Sentral ng Pilipinas (BSP) to start merger activities.

It was further revealed that the BSP had already approved six applications for mergers and consolidations involving 13 rural banks. The same applications have also been forwarded to the Securities and Exchange Commission (SEC) for approval.

Speaking during a symposium sponsored by the Rural Bankers Association of the Philippines (RBAP), BSP Gov. Rafael B. Buenaventura said that curiously they have also received applications for new players in the rural banking industry despite the merger and consolidation applications.

"Even as mergers and consolidations take place among rural banks, new players are coming into the rural banking system," Buenaventura said.

The BSP has received 22 applications for conversion into rural banks while another four are awaiting the nod of the SEC.

Mergers and consolidations have been encouraged by the BSP as a means "to consolidate, rebuild and reinforce financial capability and strength with the changing liberalized financial environment.

There are a total 1,919 rural banks divided into 782 head offices and 1,137 branches. As of April this year, the rural banking system’s total resources reached P76.2 billion representing a little over one percent of the entire financial system.

Total deposits in the system reached P49 billion while its total loan portfolio reached P44-billion and investments at P3.5 billion.

Based on the latest data from the BSP, the industry‚s non-performing assets (NPAs) approximated P14.16 billion while loan loss reserves placed at P7 billion. Non-performing loans (NPLs) in the first three months of the year reached 15.08 percent of total loan portfolio, which is better than the 17.43 percent in the same period last year.

Real and other properties owned or acquired (ROPOA) breached the P7 billion level or 24 percent higher than the P5.645 billion registered in the same period last year.