Philippine banks’ assets expand to PHP 27.7T as of August

The Philippine banking sector’s total assets grew by 6.7% year on year as of end-August amid continued growth in loans and deposits.

Banks’ combined assets rose to PHP 27.729 trillion as of August from PHP 25.988 trillion a year prior, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Meanwhile, month on month, this was 0.04% lower than the PHP 27.742 trillion recorded at end-July.

Banks’ assets are mainly supported by deposits, loans, and investments. These include cash and due from banks as well as interbank loans receivable (IBL) and reverse repurchase (RRP) net of allowances for credit losses.

Universal and commercial banks still held the bulk of the Philippine banking system’s assets with PHP 25.9 trillion as of August. Thrift banks followed with PHP 1.3 trillion, rural and cooperative banks held PHP 385.45 billion, while digital banks had PHP 141.77 billion in assets. 

Broken down, the banking sector’s total net loan portfolio, inclusive of IBL and RRP, expanded by 9.9% year on year to PHP 15.189 trillion at end-August from PHP 13.816 trillion a year ago. Month on month, it slipped by 0.5% from PHP 15.259 trillion.

Banks’ net investments, or financial assets and equity investments in subsidiaries, stood at PHP 8.167 trillion in the period, rising by 10.3% from PHP 7.407 trillion a year prior but down by 0.9% from PHP 8.242 trillion at end-July.

Meanwhile, net real and other properties acquired jumped by 17.9% to PHP 130.938 billion from PHP 111.029 billion in the same period last year. This was also up 0.9% from PHP 129.735 billion a month prior.

Banks’ other assets likewise rose by 11.2% to PHP 2.23 trillion as of August from PHP 2.005 trillion a year prior. Month on month, it climbed by 1.9% from PHP 2.187 trillion.

However, cash and due from banks slumped by 24% year on year to PHP 2.012 trillion from PHP 2.648 trillion. Meanwhile, this was up by 4.6% from PHP 1.923 trillion a month prior.

BSP data also showed that the total liabilities of the banking system stood at PHP 24.169 trillion as of August, rising by 6.3% from PHP 22.73 trillion in the comparable year-ago period but down 0.2% from the PHP 24.22 trillion seen at end- July.

This came as deposit liabilities climbed by 6.9% year on year to PHP 20.454 trillion from PHP 19.142 trillion.

Broken down, peso-denominated deposits stood at P1HP 6.811 trillion, while foreign currency deposits were at PHP 3.643 trillion.

Philippine banks’ assets continued to grow amid the BSP’s easing cycle and cuts in their reserve requirement ratios (RRR), as these helped boost demand for credit and increase their loanable funds, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Faster loan growth has been the largest contributor to the continued growth in banks’ total assets,” he said. “Continued growth in bank deposits also allowed banks to increase loans and other investments, thereby leading to the continued growth in banks’ total assets.”

In August, bank lending expanded by 11.2% year on year to P13.62 trillion, the slowest growth seen in nine months. The Monetary Board this month trimmed benchmark interest rates by 25 basis points (bps) for a fourth consecutive meeting, bringing the policy rate to an over three-year low of 4.75%.

It has now slashed borrowing costs by a cumulative 175 bps since it began its rate cut cycle in August 2024. BSP Governor Eli M. Remolona, Jr. has said that more cuts are possible as they want to support the economy amid weaker growth prospects.

Meanwhile, the BSP in March cut the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5%.

The ratio for digital banks was also lowered by 150 bps to 2.5%, while that for thrift lenders was cut by 100 bps to 0%. Rural and cooperative banks’ RRR has also been at zero since October 2024.

“Continued growth in banks’ net income also allows banks to increase their capital, lending, investments, and overall assets, as banks are among the most profitable businesses in the country,” Mr. Ricafort added.

Banks’ combined net income grew by 4.14% to PHP 198.14 billion in the first half as both net interest and non-interest earnings increased year on year, BSP data showed. Universal and commercial banks’ combined net earnings stood at PHP 184.45 billion in the first semester, while the thrift bank group booked a PHP 10.73-billion net profit, and the rural and cooperative bank sector posted net income of PHP 5.34 billion. Lastly, digital banks recorded a combined net loss of PHP 2.38 billion.

“For the coming months, continued growth in the local economy… as well as possible future Federal Reserve and BSP rate cuts would continue to sustain relatively faster growth in banks’ total resources and assets, as supported by the sustained growth in loans, deposits, earnings, and investments,” Mr. Ricafort said.

The Fed last month reduced its target rate by 25 bps points to bring it to the 4%-4.25% range. Fed Chair Jerome H. Powell last week hinted at more cuts as they seek to balance the US job market’s weakness with above-target inflation. — Katherine K. Chan