The banking industry’s trust assets rose to P4.317 trillion as of end-September, up by 6.19 percent compared to same period last year of P4.065 trillion, based on Bangko Sentral ng Pilipinas (BSP) data.
These are banks’ trust and other fiduciary business and investment management activities. At the end of the third quarter, the trust holdings of banks remained highly liquid with agency accounts comprising bulk of accountabilities.
Meanwhile, the asset structure is dominated by the 44 big banks in terms of gross loans and total financial assets. The big banks accounted for P4.288 trillion of the total trust holdings during the period.
Basically, trust assets are investments in securities issued by the government and private companies. It is an arrangement whereby a person called a trustee is appointed by a person called a trustor to administer, hold and manage funds and/or property of the trust or for the benefit of a beneficiary.
As of end-September, under total accountabilities, banks’ trust assets increased by 9.5 percent to P1.538 trillion versus P1.404 trillion same time in 2023.
Agency trusts totaled P2.061 trillion, up by 1.47 percent compared to last year’s P2.031 trillion.
Unit investment trust funds (UITF) held by banks also rose by 18.8 percent to P587.578 billion from P494.544 billion last year. The UITF portfolio, being marked-to-market, is impacted by changes in interest rates and foreign exchange rates.
BSP data showed pre-need trusts went up by two percent year-on-year to P94.139 billion while employee benefits slightly improved by 0.15 percent to P354.418 billion. Other fiduciary services likewise increased to P659.872 billion as of end-September or by 0.35 percent year-on-year.
Overall, banks’ trust holdings as cash and due from banks declined by six percent to P432 billion from P460 billion same time in 2023 while net deposit in banks also decreased by 5.6 percent to P1.02 trillion versus P1.081 trillion last year.
Meanwhile, the net financial assets went up by 13 percent to P2.67 trillion from P2.403 trillion while net loans dropped 34.8 percent to P47.957 billion from P73.607 billion.
As of end-June this year, the BSP is supervising 20 trust departments of banks and nine non-bank financial institutions (NBFI). Of the NBFIs, seven are trust corporations and two are investment houses.
The BSP said in a report that because there is sustained asset expansion, banks continue to cater to their trust clients’ growing demand. This was evidenced by the industry’s improved operations and growth that was driven by agency accounts.
During the period when the interest rate environment is on the high side, the trust industry was also able to expand its portfolio of investments in government securities.
The trust industry also continue to be profitable with strong revenues from fees and commissions which offset trust expenses.
Earlier this month, the BSP released a new circular to enhance the periodic review process for trust, investment management and other fiduciary accounts. The review process include the administrative review and the investment review.
The BSP said a trust entity will conduct periodic reviews to ensure that it performs its fiduciary duties and responsibilities as per BSP regulations.
The BSP also noted that a trust entity is expected to show what it has done in the exercise of due diligence and prudence to protect the interest of the client and beneficiaries.