Bank deposits surge 14.8% in first quarter

MANILA, Philippines – Consumer spending ground to a near-halt in the first quarter of this year but data from the central bank showed that during this time, bank deposits surged 14.8 percent to P3.1 trillion.

According to the first quarter economic and financial sector report of the Bangko Sentral ng Pilipinas (BSP) banks’ total deposits rose to P3.1 trillion during the first quarter of this year from P2.7 trillion in the same period last year.

Savings deposits rose 1.6 percent year-on-year but time deposits rose 33.6 percent and demand deposits rose 19.8 percent over the same period when compared with 2008 levels.

The surge in bank deposits fueled the 13.5 percent increase in the total resources of the banking system, rising from P5.2 trillion in the first quarter of 2008 to P5.9 trillion as of end-March 2009.

The BSP said the increase was due mainly to the rise in cash and loans account.

Universal and commercial banks, according to the BSP, accounted for almost 90 percent of the total resources of the banking system.  

However, the BSP said the number of banking institutions also continued to shrink, with the total number of head offices falling to 818 at the end of 2008.

The BSP said this decline resulted from the continued consolidation of the industry as well as the shut-down of weaker players in the banking system, particularly among rural banks.

At the end of the quarter, the BSP said the banking system’s asset quality continued to improve, with the non-performing loan (NPL) ratio easing further to 4.1 percent as of end-March 2009 compared to five percent a year ago.

The BSP said the improvement in the NPL ratio during the period was due to the 6.3-percent drop in the level of NPLs, complemented by the 14-percent expansion in the industry’s TLP. 

NPLs declined to P118.6 billion during the period under review from the previous year’s level of P126.5 billion, while TLP expanded to P2.889.6 trillion from P2.535.2 trillion during the same period last year.

The BSP said the Philippine banking system’s NPL ratio of 4.1 percent was comparatively lower than Indonesia’s 4.5 percent but higher than Thailand’s 3.1 percent, Malaysia’s 2.2 percent and Korea’s 0.6 percent.

According to the BSP, the lower NPL ratios in Malaysia, Thailand, and South Korea may be traced to the creation of publicly-owned asset management companies (AMCs), which purchased the bulk of their NPLs, a practice which was not resorted to in the Philippines.

The loan exposure of banks remained adequately covered as the banking system’s NPL coverage ratio was steady at 86.4 percent as of end-March 2009, reflecting banks’ diligent compliance with the loan-loss provisioning requirements of the BSP to ensure sufficient buffers against unexpected losses.