Financial resources reach nearly P30 trillion as of end-Oct.

By Luisa Maria Jacinta C. Jocson, Reporter

THE TOTAL RESOURCES of the Philippines’ financial system hit close to P30 trillion as of end-October, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Resources of banks and nonbank financial institutions increased by 8.3% to P29.986 trillion as of end-October from P27.683 trillion in the same period a year ago.

It was also up by 0.2% from P29.935 trillion as of end-September.

These resources include funds and assets such as deposits, capital, as well as bonds or debt securities.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the increase in resources in the Philippine financial system largely reflects “the continued growth in loans and deposits, as well as the continued growth in earnings that are added to capital, as the economy further recovered since the pandemic.”

“Higher net income, earnings and new capital fund-raising activities also further increased capitalization levels that enabled more lending activities and investments, thereby further boosting the total resources of the financial system,” he said in a Viber message.

However, Mr. Ricafort noted that the growth of total resources may have been tempered by higher interest rates, which dampened demand for loans.

To combat inflation, the BSP has raised borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October this year. This brought the benchmark rate to 6.5%, the highest in 16 years.

Data from the BSP showed banking resources jumped by 9.1% to P24.836 trillion as of end-October from P22.758 trillion in the same period a year ago. These include universal and commercial banks, thrift banks, as well as rural and cooperative banks.

Broken down, total resources held by universal and commercial banks climbed by 8.7% to P23.276 trillion as of end-October from P21.406 trillion a year ago.

Thrift banks held P1.067 trillion of total resources as of end-October, higher by 10.8% from P963 billion.

Resources of rural and cooperative banks went up by 4.6% to P408 billion as of end-October from P390 billion.

Meanwhile, the resources of nonbank financial institutions rose by 4.6% to P5.151 trillion as of end-October from P4.926 trillion.

Nonbank financial institutions include investment houses, finance companies, security dealers, pawnshops and lending companies. 

Institutions such as nonstock savings and loan associations, credit card companies, private insurance firms, the Social Security System and the Government Service Insurance System are also considered nonbanks.

“For the coming months, easing headline inflation and possible Fed rate cuts in 2024 that could be matched locally could lead to faster growth in loans and total resources,” Mr. Ricafort added. 

The BSP expects inflation to ease to 3.7% next year, within its 2-4% target band.

Market players are anticipating the US Federal Reserve to begin easing monetary policy next year. The Fed’s latest projections have penciled in a median 75 bps of cuts in 2024.