NextGen Day

MANILA, Philippines — The asset quality of the Philippine banking sector is expected to improve further as market circumstances improve, according to Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP).

Diokno said in a virtual briefing that total assets of universal and commercial banks (U/KBs) increased by 8.2% year over year as of end-April this year.

“In light of favorable market conditions, loosening limitations, and improving consumer and business mood, the BSP expects further improvement, not deterioration, in the banking system’s asset quality,” he said.

According to him, U/KBs remained the primary mover in the country’s banking system, with 93.6 percent of all loans given, 96.3 percent of all investments, and 94.1 percent of all deposit-taking activities as of end-April this year.

According to him, the country’s financial system remains bank-centric, with the banking sector accounting for 82.7 percent of the financial system’s resources in the first quarter of this year.

According to him, loans account for more than half of U/total KB’s assets, net of allowance for credit losses, followed by investment portfolios, cash, and bank loans.

“We expect the NPL (non-performing loan) ratio of banks to stay in the single digits in 2022, based on industry insights,” he said.

According to BSP data, the U/KBs’ NPL ratio was 3.65 percent as of end-April this year, while the NPL coverage ratio was 95.2 percent.

“Because credit risks persist and recovery in the impacted sectors may be uneven,” he continued, “the BSP closely monitors bank asset quality, both at the system and individual bank level.”

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