Big PH banks maintain sufficient capital in Q3 2014
MANILA, Philippines – Capital adequacy ratio (CAR) of universal and commercial banks (U/KBs) increased in the third quarter of 2014, attributed to the capital-raising activities of domestic banks, additional capital infusion of foreign banks to their local branches, and earnings generated.
CAR is in place to ensure that banks can absorb a reasonable amount of loss and comply with statutory capital requirements.The CARs of U/KBs stood at 16.32% on solo basis and 16.99% on consolidated basis at end-September 2014.
The CAR figures were both higher than the 15.94% on solo basis and 16.66% on consolidated basis recorded in end-June last year.
The Bangko Sentral ng Pilipinas (BSP) reported Tuesday, March 17 that the banks were able to increase their total qualifying capital by 5.67% quarter-on-quarter to P932.23 billion ($20.88 billion) from P882.17 billion ($19.76 billion) in end-June 2014.
The banks’ CAR figures show that U/KBs have sufficient buffer against unexpected losses that may arise during times of stress.
The industry’s capital base continues to be driven by Common Equity Tier 1 (CET 1), the highest quality among instruments eligible as bank capital. The CET 1 of U/KBs represented 13.73% and 14.49% of risk weighted assets (RWA) on solo and consolidated bases, respectively.
The banks’ Tier 1 ratios (composed of common equity and qualified capital instruments) stood at 13.94% on solo basis and 14.66% on consolidated basis.
An increased lending in the corporate sector also increased the U/KBs RWA by 3.23%.
“A strong capital position promotes financial stability which is a key policy objective of the BSP,” the central bank said.
Steady for rural, cooperative banks
Meanwhile, rural (RBs) and cooperative banks (CBs) maintain a steady position, with combined gross non-performing loans (NPLs) of 12.24% of the banks’ total loan portfolio (TLP) of P134.61 billion ($3.01 billion) at end-September 2014.
The third quarter figure improved from the 13.45% gross NPL ratio registered a quarter earlier, since the amount of NPLs carried by RBs and CBs decreased amid a rise in their TLP. The banks’ TLP increased by 1.3% from the P132.89 billion ($2.98 billion) posted in June 2014.
The TLP of RBs and CBs represented 2.49% of the banking system’s TLP of P5.42 trillion ($12.15 billion) in September last year. The NPLs of the banks comprised 0.30% of the banking industry’s TLP during the period.
RBs and CBs also set aside loan loss reserves equivalent to 57.58% of their gross NPLs in September, slightly higher than the 57.31% recorded a quarter earlier.
The top borrowers of the banks across economic sectors were agriculture, hunting, forestry and fishing; wholesale and retail trade; loans to individuals for consumption purposes; and real estate, renting, and business activities.
The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management systems and to maintain high loan quality, BSP noted. – Rappler.com
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