Banking system grows despite pandemic — DOF

MANILA, Philippines — Sound macroeconomic fundamentals allowed the Philippine banking system to exhibit growth even amid the country’s battle against the coronavirus disease 2019 or COVID-19 pandemic, the Department of Finance (DOF) said yesterday.

In his latest economic bulletin, Finance Undersecretary Gil Beltran said the banking system has grown faster than the economy, as reflected by its resources, loan portfolio, deposit base and capital.

“The Philippine banking system grew faster than nominal GDP (gross domestic product) during the period 2018 to May 2020 despite the pandemic due to sound macroeconomic fundamentals that have boosted bank resources, loan portfolios and financing options,” Beltran said.

He said bank resources reached P18.74 trillion as of end-May, equivalent to 95.8 percent of GDP. This is 7.4 percent up from the P17.45 trillion recorded in the same month last year which is equivalent to 93.9 percent of GDP.

Beltran said the gross loan portfolio of banks also rose 7.3 percent to P10.82 trillion (55.3 percent of GDP) from P10.08 trillion (54.3 percent of GDP), while deposit base expanded by 12 percent to P14.26 trillion (72.9 percent of GDP) from P12.74 trillion (68.5 percent).

The capital base of banks as of May 2020 likewise increased by 11 percent to P2.15 trillion from P1.95 trillion last year, he added.

The DOF’s chief economist noted that there has been an increase in the bonds issued by Philippine banks and corporates in the international capital market following the national government’s $2.35 billion global bond issuance last April.

The global bonds, which have maturities of 10 years and 25 years, fetched the lowest coupon rates ever achieved for these debt papers by the Philippines.

Beltran said Philippine companies issued $3.6 billion in bonds during the last seven weeks, resulting in a year-to-date figure of $5.2 billion. This is higher than the previous years’ issues amounting to $1.1 billion in 2018 and $2.5 billion in 2019.

“The international practice is that sovereign credit premiums set the benchmark behind which the corporates and banks also price their issuances,” Beltran said.

He said this increases the financing options available to banks and companies to enable them to recover once the economy is reopened.

“The existence of a variety of financing options will prepare the economy to meet the requirements of sectors that will need to replenish their working capital to resume normal operations,” Beltran said.