Espenilla: Economic expansion benefits banking system

“The banking system is healthy and profitable. Over-all profitability is buoyed by the increase in core income from lending activities,” Espenilla said. (Photo: ECCP – European Chamber of Commerce of the Philippines/Facebook)

MANILA — Banks continue to reap the benefits from the Philippine economy’s sustained expansion as shown by the robust growth of deposits and lending activities, which in turn helps ensure the industry’s health.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said banks continue to attract deposits, which as of end-May 2018 has risen by 12.5 percent.

Most of these funds are extended to borrowers and the loans “were broad-based across various borrower and industry types.”

“The banking system is healthy and profitable. Over-all profitability is buoyed by the increase in core income from lending activities,” Espenilla said.

As of end-May this year, outstanding loans of commercial banks, excluding placements in the BSP’s reverse repurchase (RRP) facility, rose by 19.4 percent.

On the other hand, bank lending, including RRP placements, in the first five months this year went up by 17.7 percent.

The central bank chief said banks continue to heed reform measures that the BSP has been introducing.

Among others, this has resulted in improvement of the industry’s capitalization to above regulatory thresholds, he said.

“Banks continue to adhere to sound credit underwriting standards as shown by the very satisfactory quality of the banking system’s loan portfolio. Moreover, banks are well prepared to bear credit losses as they have set up adequate provisions for possible defaults,” he said.

Espenilla said monetary officials “expect further expansion of the banking system, sound asset quality, adequate liquidity and rising capital buffers.”

“The trajectory for profit growth will continue, driven mainly by strong growth outlook, upbeat lending activities, product innovations, and more cost-efficient and technology-enabled operations,” he said

“As the main provider of credit to key production sectors, the banking system is key to the Philippine growth story,” he added.