The Philippine financial system experienced substantial growth with a 7.9% increase in resources, reaching P33.66 trillion in January from P31.18 trillion the previous year, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).
This considerable expansion predominantly stems from escalated bank lending and strategic rate cuts by the BSP, enhancing the financial infrastructure. Various elements such as deposits, capital, bonds, and debt securities were crucial in driving this growth across both bank and nonbank financial institutions.
The majority of this growth was attributed to the banking sector, whose resources ascended by 9.1% to P27.95 trillion from P25.62 trillion. Universal and commercial banks, which hold 77.7% of the overall resources, posted an 8.9% increase to P26.14 trillion. Thrift banks followed with a 7.4% rise to P1.16 trillion, and digital banks recorded a notable 44% surge to P133.3 billion. Similarly, resources of rural and cooperative banks grew significantly by 18.1% to P527.1 billion.
Nonbank financial institutions, including investment houses, finance companies, securities dealers, and savings and insurance associations, demonstrated a 2.6% rise in resources, totaling P5.7 trillion.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort emphasized the primary catalysts for this growth were increased bank lending and the BSP’s rate reductions since August. January bank lending surged by 12.8% to P13.02 trillion, marking the fastest rate in over two years. Additionally, the BSP’s diminution in banks’ reserve requirement ratios (RRR) helped reduce intermediation costs, spurring loan demand and enabling banks to provide more funds for lending.
Moreover, profitability within the banking sector improved by 9.76% year on year, reaching P391.28 billion, driven by consistent deposit growth and strategic capital infusions from both foreign and local investors. These factors contributed to the substantial asset growth.
Looking ahead, further reductions in RRRs starting March 28 are predicted to continue boosting the financial system’s resources. Universal and commercial banks’ RRR will decrease by 200 basis points to 5%, with corresponding reductions for digital banks and thrift lenders.
In conclusion, the remarkable growth of the Philippine financial system was facilitated by strategic rate cuts, increased lending, and resource infusions. This trend indicates a continuing positive trajectory, supported by prospective regulatory measures.
