The banking sector’s assets continue to increase at P19.439 trillion as of end-first quarter, up by 5.62 percent from same period last year of P18.404 trillion, based on Bangko Sentral ng Pilipinas (BSP) data.
Banks’ gross total loan portfolio fell by 1.9 percent year-on-year to P10.658 trillion as of end-March from P10.865 trillion in 2020 as an impact of the pandemic. By comparison, gross total loan portfolio increased by 8.77 percent in 2020 versus 2019, pre-pandemic. Loans are banks’ biggest assets along with financial assets and other loans, and cash and due from banks.
Credit growth has slowed down and in a contraction period since banks are not lending as much and borrowers are not confident to transact with financial institutions amid the resurgence of the public health scare.
The BSP continue to point to limited corporate demand and economic lockdowns for the slow total loan portfolio growth. “The decelerated credit growth is expected as the pandemic-induced recession in the real sector caught up and weighed on the financial sector in 2020. Unemployment, weak cash flows, temporary shutdown of businesses and economic uncertainty have dampened demand for loans and have even led creditors to tighten lending standards creating downside pull for credit growth,” it said in its latest financial sector report.
Banks’ financial assets was up by 18.33 percent in the first quarter at P4.603 trillion versus P3.890 trillion same period last year, while its cash and due from banks also increased by 33.19 percent to P3.531 trillion from P2.651 trillion.
The universal/commercial banks or the big banks accounted for more than 90 percent of the banking system’s total assets. As of end-March, the 46 big banks had P18.047 trillion assets, up by 5.89 percent year-on-year. Its total loan portfolio fell by 5.56 percent to P9.392 trillion but its financial assets and cash and due from banks increased to P4.449 trillion and P3.294 trillion, respectively, from the previous P3.701 trillion and P2.474 trillion.
The thrift banks reported total assets of P1.110 trillion in the first quarter, up from P1.095 trillion or by 1.37 percent year-on-year. It also had a lower total loan portfolio of P748.471 billion from P780.576 billion same time in 2020. The sector’s financial assets dropped by 9.68 percent to P108.684 billion while its cash and due from banks increased by 44.76 percent to P173.448 billion.
The banking system’s total assets is about 81 percent of gross domestic product (GDP). A weak economy translates to a weaker credit growth. But, according to the BSP, “the deceleration (in credit growth) is deemed manageable considering the impact of the pandemic.”
The country’s GDP contracted by 4.2 percent in the first quarter as the economic lockdowns continued from March 29 until mid-May to control the surge in COVID-19 cases.
ING Bank economist Nicholas Mapa said the contraction is more sharp than expected. “The growth outlook remains relatively downbeat (and while) we continue to expect second quarter GDP to post growth on a year-on-year basis, we may have to trim our expectations especially if partial lockdowns are extended through May,” he said.
Mapa said there is renewed concerns on stagflation with a GDP decline coupled with a high inflation of above the two-four percent BSP target.
He said the second quarter GDP “will likely revert to ‘growth’ but mainly due to base effects after the plunge of 16.9 percent last year.”