The recently released BSP Report on the Philippine Financial System for the First Semester of 2024 highlights the robust performance of the Philippine banking sector, marked by sustained growth in assets, loans, deposits, and earnings, along with strong capital and liquidity positions on the back of an improved macroeconomic environment and BSP’s steady pursuit of progressive financial sector reforms.
“Banks remain the pillar of the Philippine financial system. The BSP’s financial reforms help sustain the resilience of the banking sector, enabling banks to take a bigger role in the domestic economy through continued financial services to their clients, ultimately improving the financial future of every Filipino,” BSP Governor Eli M. Remolona, Jr. said.
The report likewise presents the satisfactory performance of foreign currency deposit units of banks and trust entities and features thematic box articles on BSP’s strategic priorities.
“Moving forward, the BSP will continue to pursue prudential policy reforms aimed at promoting institutional stability, digitalization, and inclusive sustainable finance,” Remolona said.
“The BSP will also sustain its cooperation and collaboration with industry partners, stakeholders, and key government agencies to advocate for necessary legislation towards a resilient, dynamic, and inclusive financial system,” he added.
The report showed that the share of the banking sector to the financial system’s total resources increased further to 83.4 percent.
This placed banks in a position to support the growth of the domestic economy, delivering financial products and services to businesses and Filipino households.
The total assets of the banking system reached P26.2 trillion in June 2024, recording a 12.4 percent growth year-on-year.
This was faster than the 9.1-percent increase in June 2023 and the 11.0-percent pre-pandemic growth rate.
BSP said the expansion was largely funded by domestic deposits and channeled mostly to lending and investment activities collectively accounting for 81.6 percent of the system’s total assets over the reference period.
Banks’ loan portfolio expanded further with sustained lending to households and key productive sectors.
This reflected strong consumer and business confidence on the back of a positive economic outlook and solid macroeconomic fundamentals.
Gross total loans grew by 12.4 percent to P14.3 trillion in June 2024, largely driven by the 23.3-percent growth in loans to households for consumption and 12.1percent growth in loans to the real estate sector, respectively.
The real estate sector remained the largest recipient of bank loans, accounting for 18.3 percent (or P2.6 trillion) of the system’s P14.3 trillion in total loans.
This was followed by households with a share of 13.3 percent (P1.9 trillion), wholesale and retail trade with 10.5 percent (P1.5 trillion), electricity, gas, steam, and airconditioning supply with 9.11 percent (P1.305 trillion), and manufacturing with 9.06 percent (P1.297 trillion).
The broad-based credit expansion highlights banks’ predominant role in the continued development and growth of the economy. The ratio of banks’ credit-to-gross domestic product2 improved from 54.9 percent in June 2023 to 56.4 percent, in June 2024.
The banking system provided strong credit support to marginalized and priority sectors in the country, contributing to the continued promotion of inclusive growth for all Filipinos.
Bank financing for micro, small, and medium enterprises (MSMEs) reached a new peak of P488.1 billion in June 2024, surpassing the P461.4 billion in June 2023.
Similarly, based on preliminary data as of June 2024, banks allocated 192.4 percent (P1.7 trillion) of their total loanable funds (P912.7 billion) for agriculture, fisheries, and rural development (AFRD) financing, as prescribed under Republic Act (RA) No. 11901 or the AFRD Law.
This was an increase from the 36.4 percent (P3.1 trillion) AFRD compliance rate recorded in June 2023 (total loanable funds of P8.4 trillion) on account of a shorter reference cut-off date in computing the total loanable funds as provided under the law.
