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Thursday, August 17, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Monday, November 28, 2016 | Manila, Philippines

BY Arnold S. Tenorio Research Head

Banks more robust as third quarter ends

THE COUNTRY’s biggest banks opened the fourth quarter on a stronger footing, as they fortified buffers against potential losses.

BusinessWorld’s 3rd Quarter Banking Report (QBR, S4/1-8 of today’s issue) shows that the median capital adequacy ratio (CAR) of Philippine universal and commercial banks improved to 17.89% from the previous quarter’s 17.63%.

CAR -- 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 CAR of 10%.

Big banks increased the proportion of their deposits tied up in loans to 65% at the close of the third quarter, even as their average gross non-performing loans (NPL) ratio eased slightly in the same period.

The increase in the third-quarter CAR was despite a reduction in big banks’ common equity tier 1 (CET1) ratio to 14.65%, from the 15.13% in the previous three-month period. Introduced in the wake of the global financial crisis, CET1 measures the core capital of a bank, as it includes common shares and retained earnings. Under Basel III, banks should meet a minimum ratio of 4.5%.

Despite the drop in their CET1 ratio, big banks compensated with an increase in their additional tier 1 capital (comprising convertible and hybrid securities), hiking their tier 1 ratio to 17.42% in the third quarter from the 16.53% in the second.

Security Banking Corp. emerged as the highest-capitalized of the country’s lenders with assets of at least P100 billion. It was followed by Asia United Bank, Bank of Commerce (BanCom) and Rizal Commercial Banking Corp.

Asset-wise, BDO Unibank, Inc. remains at the top, followed by Metropolitan Bank and Trust Co., Bank of the Philippine Islands (BPI) and Land Bank of the Philippines -- all unchanged from the second quarter.

Of those with assets of at least P100 billion, Security Bank has been growing the fastest.

BDO Unibank also issued the most amount of loans last quarter, followed by Metrobank, BPI and Landbank.

The same three months saw East West Banking Corp. as the most aggressive lender, with growth of over 30% year-on-year, followed by BanCom, Union Bank of the Philippines and Metrobank.

Depositors entrusted the most amount of money to BDO Unibank, followed by BPI, Metrobank and Landbank.

However, EastWest has been growing its deposit base the fastest, followed by UnionBank, China Banking Corp. and Landbank.

Landbank was the most liquid Philippine lender, with a liquidity ratio of nearly 60%, followed by Security Bank and Development Bank of the Philippines.

Since 1987, BusinessWorld has been tracking 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 lenders’ health.

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