Credit card receivables up 4.7% to P143 billion

MANILA, Philippines - Credit card receivables of banks operating in the Philippines increased 4.7 percent last year amid the country’s stronger than expected economic growth, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

Data showed that credit card receivables of universal, commercial, and thrift banks reached P142.98 billion last year or P11.69 billion more than the P133.6 billion in 2009 as consumers turned to their credit cards to finance the purchase of goods and services.

Credit card receivables in the fourth quarter was P9.05 billion or 6.75 percent higher compared to the receivables in the third quarter that amounted to P133.93 billion.

“Use of credit cards for the (fourth) quarter was spurred by shopping activities during the Christmas season,” the BSP said in a statement.

Data showed that universal and commercial banks accounted for 83.75 percent of the total credit card receivables last year while credit card subsidiaries of universal and commercial banks cornered a 16.3 percent share. Thrift banks got a marginal share of 0.05 percent.

Credit card receivables of universal and commercial banks as well as their subsidiaries increased 4.6 percent to P142.68 billion last year from P136.36 billion in 2009 while the receivables of thrift banks surged 24.2 percent to P292 million from P235 million.

Data showed that the banking industry’s total loan portfolio expanded 8.5 percent to P2.992 trillion from P2.757 trillion.

The BSP said the ratio of non-performing credit card receivables to total credit card receivables of the industry improved to 12.59 percent last year from 12.65 percent in 2009 despite the 4.2 percent increase in non-performing receivables to P18 billion from P17.28 billion.

The country’s gross domestic product (GDP) growth zoomed to 7.3 percent last year, exceeding the government’s revised growth target of 5-6 percent. This was the country’s fastest economic growth since 1976.

The BSP is lukewarm to the proposed imposition of a cap on interest rate charges imposed by credit card companies as the move could only introduce distortions in the credit market.

The regulatory body said it supports the principle of market-determined pricing as the best way to serve the interest of the public and the most effective way of allocating credit.

It added that the BSP’s Monetary Board only sets the interest rates for the central bank’s overnight borrowing and overnight lending facilities to influence the cost and availability of money and credit.

The BSP warned that setting of interest rate would “invariably fuel the moral hazard and adverse selection problem that underpin a credit rationing framework.”

Based on past experience with interest rate-setting made apparent limitations of an administratively fixed interest rate and prompted the eventual shift to market-oriented interest rate policy in 1983 through Central Bank Circular 905.

The BSP explained that it could not impose a statutory ceiling on interest rates as this would undermine the ability of financial institutions to price their credit exposures based on the underlying risk profiles on their client resulting to more stringent requirements leading to reduced credit availability.

Data from the BSP showed that there are 19 credit card issues including 15 universal and commercial banks as well as their subsidiaries and four thrift banks.

About 6.7 million credit cards are in force while credit card receivables stood at P111.88 billion as of end September 2010. About 13.2 percent of the total receivables are non-performing.