Philippine banks remain sound and stable, with adequate capital levels and low bad loans, the Bangko Sentral ng Pilipinas said Thursday.
The Bangko Sentral released the data on capital adequacy ratio and non-performing loans, after debt watcher Moody’s Investor Service changed its credit outlook on Philippine banks from “positive” to “stable.”
The Investor Relations Office of the central bank, however, said Moody’s identified the Philippine banking system as one of the most resilient in the world in the event of a crisis.
Stress tests conducted by Moody’s showed that the impact on bank capitalization of a simulated shock would be lower for the Philippines than the global average.
Under Moody’s hypothetical extremely severe scenario, the average capitalization ratio globally would drop 5.5 percentage points, faster than the decline of 4.9 percentage points for the Philippines.
There are 68 economies whose banking systems are assessed by Moody’s.
“The Philippine banks’ resilience to stress is positive compared to other banking systems around the world,” Moody’s said in its latest Philippine banking outlook.
Moody’s said it assigned a “stable” outlook on the Philippine banking system after it upgraded the credit ratings of various banks in the country. The stable outlook means that the new and higher credit ratings of banks are likely to be maintained over the short term.
Prior to the upgrades, Moody’s had assigned a “positive” outlook, which indicated that the previous ratings were up for an upgrade.
Among the banks whose credit ratings were revised were Banco de Oro, Metropolitan Bank and Trust Co., Bank of the Philippine Islands, Land Bank of the Philippines, Philippine National Bank and Rizal Commercial Banking Corp.
Meanwhile, Bangko Sentral said capital adequacy ratio of universal and commercial banks stood at 16.48 percent in the second quarter, higher than 15.07 percent in the first quarter.
“The increase was on account of the banks’ capital raising activities and earnings generated in the second quarter of 2015 which enabled the industry to raise its qualifying capital by 6 percent quarter-on-quarter to P973.6 billion in June this year,” Bangko Sentral said.
“The CAR figures are an indication of the universal and commercial banks continuous efforts to maintain adequate capital buffer against unexpected losses that may arise during times of stress,” it said.
Meanwhile, banks’ non-performing loan ratio, a measure of banks’ level of bad debts, eased further to 1.86 percent as of end-August from 1.9 percent in July and 2.21 percent a year ago.
“Since November 2014, the monthly loan quality indicator has been below 2 percent,” Bangko Sentral said.
Banks provisioned for 141.19 percent of its gross NPLs as of end-August, an improvement from 140.15 percent in July.
“The latest loan quality indicators reflect the universal and commercial banks continued adherence to high credit standards,” Bangko Sentral said.