The Philippine banking industry is registering modest growth currently by trying to overcome from the low-level of bad assets against its total loan portfolio which had dipped its creditworthiness.
Despite its concentrated efforts, the Bangko Sentral ng Pilipinas (BSP) reported that the strength of the Philippine banking sector is yet relatively weak as per regional standards, according to news published by ABS-CBNNews.
Recently, a milestone merger that took place between Banco de Oro Universal Bank and Equitable PCI Bank was accomplished. Before this deal, many other major mergers were consummated, for instance, the one between the Prudential Bank and the Bank of the Philippine Islands, and between International Exchange Bank and Union Bank of the Philippines.
As per BSP, the percentage for the banking industry’s bad assets against its aggregate loan portfolio was declining to pre-1997 stage where non-performing assets along with non-performing loans had skyrocketed due to financial crisis in Asia.
The BSP stated that the overall bank set-up in the country was cut down by 13 operating banks to 858 by end-June, down from 871 in 2006. As of June 2007 end, Presently, Philippines has 38 operational commercial and universal banks running 4,259 divisions, 737 rural and cooperative banks having 1,371 branches and 83 thrift banks operating through 1,250 branches.
Though the banking industry does not seems to be much burdened by the mergers that have taken place, industry experts say that sophistication-oriented and technology-driven financial market has induced banks to seek bigger market size. The losses that happen due to bad loan portfolio and mergers thus get balanced.
A study reveals that the banking system’s creditworthiness ratio remains well ahead of the BSP’s regulatory obligation of 10% and global norm of 8% due to increased activities of capital raising by banks. This testifies that the sum total performance of Philippines’ banking industry is modest when weighed against international standards.
As per a Senior Research Analyst at RNCOS, “The Philippines’ banking industry is growing steadily together with the adoption of new banking technologies by the banks. However, due to a multiple of reasons, the industry doesn’t seems to be content with its performance. So to get over this, the banking industry has to come up with new investment policies to attract more customers. Also, they can raise their branch rationalization to balance the mergers”.
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