Banks build up branch network to cash in on strong savings

MANILA, Philippines - Personal savings hit record levels last year, forcing banks to frantically build up their branch network this year, but loan growth will be challenged.

According to the First Metro Investment Corp. Research head Cristina Ulang, personal savings drove deposit resources of the banks, hitting P3.6 trillion.

“Personal savings in the Philippines averaged P1.7 trillion from 2001 until 2015, reaching an all-time high of P3.6 trillion in December 2015, from P1.1 trillion in April of 2005,” Ulang said.

She said that the number of households with savings reached a record high of 31.6 percent from 25.7 percent in the previous quarter.

“Households with savings increased across all income groups, with the middle-income group posting the highest increment quarter-on-quarter followed by the low-income group,” Ulang said.

Of these household savers, about 68.5 percent have bank deposit accounts and 39 percent prefer to secure their savings at home.

Another 24.9 percent placed their savings in community cooperatives, paluwagan and other credit/loan associations.

To attract deposits, banks have been enlarging their domestic footprint – constructing brick and mortar branches outside of the greater metropolis, creating banking offices, which are scaled-down bank operations, and capitalizing on e-banking technology.

BDO Unibank Inc. said it was looking at between 50 to a hundred new branches, including its rural bank, One Network Bank.

The Metropolitan Bank & Trust Co. reported recently that it was looking to construct 20 to 30 branches this year, half of which will be positioned within Metro Manila.

The well-capitalized and liquid banking sectors are the key elements in attracting higher deposits and credit. There remains a lot of opportunities for scaling up savings mobilization.