Deposits, loans stir up banking sector growth

CEBU, Philippines – Cebu's banking sector continued to experience growth in both deposits and loans this year, mainly driven by Cebu's consumer-driven economy.

"[Economic] indicators tell that progress here is big," Maximo Eleccion, past president and security committee chair of Cebu Bankers Club, said in an interview.

Economic activities have supported growth of Cebu's banks.

Eleccion said that loans, particularly auto and housing loans, have increased this year.

Banks in Cebu are deemed to be among the fastest growing in the country in terms of loan and deposit growth, mainly supported by consumers.

The bank official observed that growth can be seen everywhere like the jampacked shopping malls where people are spending and the increasing OFW remittances which are propelling domestic spending.

It is also a good development, he added, that some banks are starting to expand in the countryside, thus reaching to more people in province areas.

"Banks are spreading also which is advantageous to the public," he noted.

Deposit  Growth

Based on data from the Philippine Deposit Insurance Corp. (PDIC), money deposited in Cebu banks saw a 10 percent growth in the first half of 2016 to P423.66 billion, reflecting Cebu's growing economic activity.

Data showed that Cebu's bank deposits rose from P385.2 billion recorded in the same period in 2015.

From January to June 2016, total deposit accounts held by Cebu banks also stood at 2,372,473 million, up from last year.

The number of banking offices in Cebu as of end June also reached 513, accounting for most in the Central Visayas region which has a total of 609.

Central Visayas, which also includes Bohol and Siquijor provinces, also recorded a 2 percent increase in bank deposit amount to P462.8 billion, from P454.2 billion last year.

That amount represents 2,979,213 million accounts in the whole region as of end June.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. had lauded the good performance of Cebu-based banks, given Cebu's growing economy.

He said Cebu banks are in the position to draw in fresh foreign investments given Cebu's potential investment and growth.

Support  Growth

In its third quarter report on the Economic and Financial Developments, the BSP said the Philippine banking system continued to be resilient in supporting the economy’s long-term growth and financial conditions.

"This was evident in the steady growth in assets and deposits of banks’ balance sheets during the review quarter," the central bank noted.

"Banks remained dominant in the financial sector, with universal and commercial banks (U/KBs) accounting for 90 percent of total banks’ assets. In terms of the number of head offices and branches/agencies, non-bank financial intermediaries continued to have a wider physical network than banks, consisting mainly of pawnshops," the BSP reported.

The banking system's total resources grew by 10.4 percent to P13.1 trillion as of end-September 2016 from P11.9 trillion in the previous year; and by 1.8 percent from P12.9 trillion posted in the previous quarter.

"As a percent of GDP, total resources stood at 92.7 percent," BSP said.

Savings and demand deposits remained the primary sources of funds for the banking system.

Nationwide, banks’ total deposits as of end-September 2016 amounted to P7.7 trillion, 13 percent or P900 billion higher than the year-ago level On a quarterly basis, total deposits grew by 1.2 percent.

Demand and savings deposits expanded by 2.3 percent and 1.9 percent, respectively while time deposits declined by 1.5 percent.

On the other hand, foreign currency deposits owned by residents increased by 4.7 percent to P1.6 trillion.

Robust economic environment and continuing expansion of branch network of banks nationwide boosted deposit growth.

It has been noted that more depositors continued to entrust their savings in banks.

Outlook

In a December 12 research note by Moody's Investors Service, it said the Philippine banking system remains generally stable

Moody’s had already given Philippine banks a “stable” outlook in its Oct. 31 report, buoyed by sound economic fundamentals despite potential risks of the country’s rising property sector, conglomerates and small businesses as well as possible shifts in policies under the administration of President Duterte.

Philippine banks remain generally robust due largely to a supportive economy, but rising exposure to the property sector, conglomerates and small businesses as well as possible “significant” shifts in policies under the current administration pose risks to the system, Moody’s said.

“Our outlook for the Philippine banking system over the next 12-18 months is stable, based on the robust fundamentals of the system and the country’s macroeconomic stability,” Moody’s noted.

The stable outlook for Philippine banking system is attributed to a general economy that remains robust and stable, hence supportive of bank credit growth.

Moody’s expects the Philippine economy to grow 6.5 percent this year and in 2017 from last year’s 5.9 percent.

Government economic planners expect growth to average 6-7 percent for 2016 and 6.5-7.5 percent next year.

Moody’s cited that continuing robust household consumption, an increased pace of investments buoyed particularly by strong business sentiment and an increase in state spending particularly for infrastructure support its expectations of robust economic growth that should continue to shield the country from external shocks. (FREEMAN)