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Sunday, December 17, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Monday, May 29, 2017 | Manila, Philippines

BY Arnold S. Tenorio, Research Head

PHL banks going from ‘strength to strength’

WHEN leadership at the Bangko Sentral ng Pilipinas (BSP) changes hands by the end of next month, the new governor will inherit a banking system that is set to -- in the words of a top banker -- “go from strength to strength.”

At the start of the second quarter, the country’s largest lenders were more than amply capitalized.

BusinessWorld’s 1st Quarter Banking Report (QBR) shows that the combined capital adequacy ratio (CAR) of universal and commercial banks (U/KBs) was down slightly from the previous three-month period.

But at above 18%, the ratio remains well above the regulatory minimum of 10% as well as the international standard of eight percent.

Local banks, which accounted for the bulk of the industry’s total assets, nudged up their combined CAR, even as the ratio for foreign lenders eased slightly.

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.

Profitability, however, remains in a soft patch, as the median return on equity (RoE) of U/KBs fell to 4.27% by the end of the first quarter of this year from 5.23% in the final three months of 2016.

This as banks have complained of increased competition, as they scramble to get a bigger slice of the costlier consumer lending pie.

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

Viewed across the sweep of Governor Amando M. Tetangco, Jr.’s 12 years at the helm of the BSP, the Philippines’ biggest banks have kept their solvency ratios at a high level despite the more than threefold increase in their combined assets over that period.

Asset quality also has improved, with the non-performing loan (NPL) ratio of the biggest banks averaging 9.2% before Mr. Tetangco became BSP governor, to 1.5% as of the first quarter of this year.

Data from the QBR, which marks its 30th year, show the shift in the rankings among the country’s biggest banks from the time Mr. Tetangco assumed office in 2005 to the final quarter before he steps down.

From eighth place in 2005, BDO Unibank, Inc. has climbed to the top spot in terms of asset size after a series of acquisitions beginning with its merger with then third-ranked Equitable PCI Bank, Inc.

Metropolitan Bank and Trust Co. still had the highest proportion of liquid assets 12 years since.

Citibank, which was the lone multinational among the top 10 U/KBs in terms of assets 12 years ago, has since dropped out, leaving the field to an all-Filipino cast.

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

The QBR 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.

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