Bank assets rise to P30.7 trillion in July

Philippine banks' total assets surged by 10.7% to P30.72 trillion in July, as per preliminary data from the Bangko Sentral ng Pilipinas (BSP). The growth was driven by a combination of sustained lending and deposit expansion. Total assets, comprising loans, investments, cash, and other holdings, rose from P27.74 trillion in July of the previous year.

The annual increase was primarily due to a larger stock of loans and investments held by banks, along with growth in deposits that support operational funding. Banks' loan portfolio, encompassing loans to other banks and short-term placements backed by securities, expanded by 10.8% to P16.91 trillion in July, compared to P15.26 trillion a year earlier.

RCBC chief economist Michael Ricafort noted that the annual asset expansion aligned with bank loan growth of approximately 10%, with consumer borrowing increasing faster as some purchases were made earlier due to concerns about rising prices and interest rates amid the Iran-Middle East conflict. He attributed this trend partly to people attempting to acquire goods before prices and rates escalated further, as well as the impact of higher inflation resulting from the conflict on purchasing power and income available for spending, thus spurring loan demand.

Banks' investments were valued at P8.91 trillion in July, marking an eight percent increase from P8.24 trillion a year prior. On the funding side, deposits grew by 7.9% to P22.06 trillion from P20.44 trillion a year earlier. Ricafort linked this deposit growth partly to increased public confidence following the Philippine Deposit Insurance Corp.'s decision to double insurance coverage to P1 million per depositor per bank.

He also attributed the rise to reductions in banks' reserve requirement ratio since late 2024, which have made more funds available for lending. The reserve requirement ratio dictates the portion of deposits banks must keep in reserve. Banks' total capital reached P3.65 trillion, an increase of 3.8% from P3.52 trillion a year earlier.

Ricafort suggested that ongoing profitability contributed to the growth of banks' capital and assets. Looking ahead, Ricafort warned that higher global and domestic interest rates linked to geopolitical tensions could potentially hinder banks' earnings and asset growth. Additionally, he highlighted the potential impact of higher nonperforming loans, or loans that borrowers fail to repay as agreed, on banks' financial performance.