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Monday, October 23, 2017 | MANILA, PHILIPPINES
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   banking report
Date posted: Tuesday, February 28, 2017 | Manila, Philippines

Philippine lenders’ balance sheets stronger, cleaner in Q4 — report

THE COUNTRY’s biggest banks opened the first quarter of 2017 on a stronger footing, as they increased their buffer against potential losses but profitability suffered amid tighter competition.

BusinessWorld’s 4th Quarter Banking Report shows that the average return on equity (ROE) of universal and commercial (U/KBs) operating in the country slipped to 5.43% in the final three months of last year from the 7.25% in the previous three-month period.

ROE measures the amount that shareholders make on every peso invested in a company.

Dragging down the overall ROE was a dip in the ratio for local banks to 9.54% in the fourth quarter last year from 9.83% in the third quarter. Local banks accounted for at least 90% of the combined assets of the industry.

Despite the decline in their profitability, the biggest banks firmed up their ability to absorb losses, as their median capital adequacy ratio (CAR) rose to 18.96% at the close of the fourth quarter from 17.89% in the previous three-month period.

CAR, which is a measure of a bank’s solvency, indicates its ability to absorb losses without having to imperil the funds entrusted by depositors. The Bangko Sentral ng Pilipinas (BSP) requires a minimum ratio of 10%.

Big banks have kept the proportion of their deposits tied up in loans at 65%, but trimmed their non-performing loan (NPL) ratios quarter-on-quarter. Despite the lower NPL ratios, lenders have jacked up their combined loan loss reserves amid rising interest rates brought about by the US Federal Reserve’s decision last December to hike its key rates for the second time since the global financial crisis.

Since 1987, BusinessWorld has been tallying the quarterly performance of the country’s largest lenders based on their published statements of condition.

The newspaper’s quarterly banking report ranks banks in terms of the size of their balance sheet. Apart from asset size, the report provides other key ratios used in measuring bank performance, such as capital adequacy, earnings and liquidity -- all key components of the CAMELS (capital adequacy-assets-management capability-earnings-liquidity-sensitivity) system used internationally in evaluating a lender’s health.

For more details visit http://research.bworldonline.com.

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