The Philippine financial system sustained its growth momentum as it capped the year 2016 with a solid performance amid lingering uncertainties in the global financial markets. The banking system, which is the core of the financial system, remained stable as manifested by improved asset quality, ample liquidity, sufficient capitalization and increased profitability, together with expansion in assets, loan portfolio and deposits. The banking system posted double-digit growth in assets, loans, deposits and net income.
In particular, the banking system registered an annual asset growth of 12.4 percent to P13.6 trillion driven by a 16.6 percent loan expansion to P7.6 trillion and funded by the sustained inflows of deposits which grew by 13.8 percent to P10.5 trillion. Moreover, net income went up by 14.2 percent to P153.8 billion. Banks also reported a decline in non-performing loan (NPL) ratio to 1.9 percent and a strong capital adequacy ratio (CAR) of 15.4 percent1. Meanwhile, the banking system remained domestically oriented as cross-border financial position of banks was minimal.
At end-2016, the country has 602 operating banks and 10,576 bank branches and other offices, including 691 micro banking offices (MBOs). There were also 19,084 automated teller machines (ATMS) and 119 banks with electronic banking facilities. Accordingly, the Bangko Sentral ng Pilipinas (BSP) continues to widen financial access points under the national financial inclusion strategy.
The banking system’s foreign currency deposit unit (FCDU) system exhibited asset expansion, stable funding from depositors and higher net profit. Meanwhile, total resources of the trust industry grew by 10.8 percent to P3.0 trillion and represented 21.8 percent of the banking system’s total assets.
Foreign bank branches and subsidiaries fared better in 2016 resulting in 6.8 percent asset expansion backed up by deposit generation and capital infusion from existing and new foreign players.
Non-bank financial institutions (NBFIs) consisting of NBFIs with quasi-banking functions (NBQBs)2 and non-stock savings and loan associations (NSSLAs) registered stronger asset base and sustained profitability.
As part of its supervisory efforts to ensure the resilience of the financial system, the BSP continues to pursue proactive regulatory reforms aimed at broadening access to financial services and promoting competitiveness in the financial system, strengthening corporate governance and risk management standards, enhancing supervisory oversight on NBFIs, and promoting accelerated development of the capital market. These reform initiatives are anchored on the BSP’s policy objectives of promoting financial stability and financial inclusion.
1 CAR data on solo basis of universal and commercial banks as of end-September 2016
2 Composed of financing companies and investment houses