Number of banks down by 33 in 2009

MANILA, Philippines – The number of banks in the country was reduced by 33 last year as the Bangko Sentral ng Pilipinas (BSP) continued to encourage major players to consolidate to boost the industry’s capital and client base as well as asset quality.

Based on the central bank’s fourth quarter 2009 Report on Economic and Finance Developments, the number of banking institutions fell further to 785 as of end-December 2009 from the year-ago level of 818.

The BSP said the reduced number indicated the continued consolidation of banks as well as the exit of weaker players in the banking system.

By banking classification, the head offices of universal and commercial banks was unchanged at 38 last year.

On the other hand, the number of thrift banks went down to 73 from 77 while that of rural banks declined to 674 from 703 with the closure of several banks associated with the controversial Legacy Group.

The BSP reported that the number of operating network including branches of the banks went up to 7,835 from 7,630 due to the increase in the branches of universal, commercial, thrift, and rural banks.

The branches of universal and commercial banks went up to 4,482 from 4,409 while that of thrift banks increased to 1,260 from 1,250. The number of branches of rural banks, likewise, increased to 2,093 from 1,971.

Total resources of universal and commercial banks went up by 7.5 percent to P6.4 trillion last year from P6 trillion in 2008 due mainly to the rise in debt securities. The industry accounted for almost 90 percent of the total resources of the banking industry last year.

The BSP earlier said there is room for further consolidation among local banks in order to strengthen the capital base, asset quality, and client base of major players in the local banking industry.

BSP Deputy Governor Nestor Espenilla Jr. said studies showed that there are still too many universal and commercial banks considering the size of the country’s economy.

“In fact you wouldn’t say that the banking industry in the Philippines is very concentrated to begin with. Lending agencies even say that the industry is fragmented because for the size of the economy, there are still too many commercial banks at 38,” Espenilla stressed.

Both the BSP and state-run Philippine Deposit Insurance Corp. (PDIC) have launched a P5-billion incentive scheme to spur mergers and consolidations in the country’s rural banking industry under its Strengthening Program for Rural Banks (SPRB).

The PDIC has been pushing for the immediate liquidation of closed banks instead of undergoing rehabilitation as only four out of 511 closed banks have successfully been rehabilitated.

PDIC is currently managing 511 closed banks under receivership and liquidation of which only four have been rehabilitated. Of the 81 banks that were ordered closed by the Monetary Board, 27 applied for rehabilitation but failed since 2005.

Furthermore, PDIC earlier expressed concern that of the total 700 rural banks about 179 were under the central bank’s prompt corrective action scheme. On the other hand, 103 rural banks were lacking in capital. –Lawrence Agcaoili (The Philippine Star)