The Philippine banking system remains stable amid the COVID-19 crisis and is in a strong position to service the financing requirements of economic recovery, according to the central bank of the Philippines (BSP).

BSP Governor Benjamin Diokno said at an online briefing that credit activity was expected to improve in the coming months amid the accommodative policy stance of the central bank, the national government’s accelerated vaccination program, and implementation of safety measures and localized lockdowns in the National Capital Region.

This view was consistent with the results of the latest banking industry survey which showed that the credit outlook remains positive with double-digit growth seen in the next two years.

As of end-July 2021, total loans declined by a slower rate of 0.4 percent year-on-year to P10.8 trillion as of end-July 2021 compared to the 5.0 percent decline a year ago.

Diokno said the positive performance of the Philippine banking system “is evidenced by sustained growth in its assets, deposits, and capital, as well as ample capital and liquidity buffers and loan loss reserves.”

Based on end-July 2021 preliminary data, banks’ total assets grew by 5.4 percent year-on-year to P19.8 trillion.

Bank assets were primarily in the form of loans (52.6 percent) and portfolio investments (26.6 percent). Funding was sourced largely from deposits, which grew by 7.2 percent during the period to P15.4 trillion, indicating the public’s continued trust and confidence in the banking system.

The Gross non-performing loan ratio stood at 4.5 percent as of end-July 2021 but was accompanied by a high bad loan coverage ratio of 82.4 percent. This remains within the BSP’s and banks’ projections for the year.

Banks also maintained sufficient capital and liquidity buffers. For the first half of 2021, the capital adequacy ratios of the universal and commercial banking industry further improved to 17 percent and 17.6 percent on solo and consolidated bases and remained higher than the 10 percent regulatory minimum.

Liquidity buffers also remained well above the minimum threshold of 100 percent. In particular, big banks’ solo and consolidated liquidity coverage ratios stood at 198.4 percent and 196.4 percent as of end-June 2021.

The net stable funding ratio of the country’s largest banks remained high at 144.4 percent and 144.5 percent on solo and consolidated bases, during the same period.