Banking in PH Part II: Raves for BSP transparency & a look at individual banks
This article has three basic parts: (1) praise for BSP transparency, (2) review of Part 1, and (2) scan of individual banks.
Praise for BSP transparency
One of the thing that astounds me is how ignorant I am about what is going on within Philippine government. I draw conclusions easily within this ignorance, and I can see that voters do the same thing. It is surreal how convinced we come to be without knowing anything at all about what government is REALLY doing. Rather, we spend our time concocting elegant defenses of our ignorant position using simplistic or mythical arguments picked up in tabloid media.
It is a huge problem, and . . . granted, we should accept accountability for our lazy presumptuousness . . . but I think it would help if government were to do a better job of popularizing their successes.
Several months ago, I was rummaging around on the web site of the National Economic Development Authority (NEDA) and was impressed with the superior work done to put plans and metrics and data (e.g., status reports on infrastructure investments) into place. These are the stuff of good corporate management. This work is one of the unseen disciplines that President Aquino has put into place (yes, there are disciplines other than Duterte’s “kill them”), and all future administrations will benefit from this fine groundwork. NEDA has continued to develop depth in its plans and reporting, with separate long-term plans being developed for National Development, Manila Transportation and Manila Floods.
When you feel the need to disabuse yourself of the notion that Philippine government is “inept”, visit the NEDA site and prowl around. Presidential candidates should be required to do this. Another site to investigate is the much maligned (for “DAP”) Department of Management and Budget (DBM). Do that and you will join the ranks of the rare, the unique, the informed.
A third data-rich site to visit is Bangko Sentral ng Pilipinas (BSP). Head directly to the Key Statistics page, and click away. Start with metadata. The financial and economic health and wealth of the Philippines is at your fingertips.
I believe President Aquino does not jump and shout for FOI because he knows his agencies have “bought into” transparency, and BSP is leading the way. It helps that the agency MUST HAVE sophisticated computer systems to handle their business, and they can dedicate a portion of that computing power to statistics and reports. That is the track that other agencies are also on, but some have not progressed as far. They will.
Why is FOI needed when the press and even presidential candidates do not trouble to read what is already there?
Kudos to BSP and it’s management team under
Secretary of Finance Cesar Purisima Amando M. Tetangco, Jr. World class.
In the first section, I wanted to present a basic overview and “sizing” of different elements of the banking industry. We learned that:
- Universal and commercial banks – 40 of them – represent 88.6% of all banking assets.
- There are numerous specialized banks and non-banks, like thrifts, rural and cooperative banks, trust companies and pawnshops (over 17,000 of them!!).
- The assets of the large Universal banks (80% of total assets) are comprised very roughly of 1/4 debt securities, 1/2 well diversified loans (primarily to businesses; consumer loans are minimal), and 1/4 is “other”.
- Funding of assets at Universal banks comes primarily from domestic deposits (85%) collected from branches.
- We structured a “to do list”: (1) look at income and performance ratios of banks, (2) examine individual bank financials, and (3) understand “grass roots” banking better: microfinance, pawn shops and payday loans.
This second installment leads us into individual banks.
A look at individual banks
First, let me provide three excellent reference sources on banking that are derived from the sophisticated regular six-month comprehensive reviews provided by BSP:
- The Philippine Banking System as of June 2015
- The Non-Bank Financial Institutions with Quasi-Banking Functions as of June 2015
- Appendices (Data Tables) as of June 2015
This information is exhaustive, and exhausting to go through. But there are gems in the Banking Report, such as the above chart on banking consolidation. The “Non-Banks” will be looked at in a later blog article, but for those of you interested in this field . . . there you go. The Appendices provide the nitty gritty facts and figures as to how numbers roll up and trend. We’ll dig into a few of them as we proceed.
What I learned by searching for individual banks is that there is a better classification than “Universal or Commercial”, and that is to consider banks according to their charter as: (1) Private Banks, (2) Government Banks, or (3) Foreign Branches and Subsidiaries. Here’s how the pie slices:
Local banking is done by private and government banks. Foreign units are mainly centralized in Manila. With new rules for ASEAN integration, we may see more foreign banks with broad networks.
Here’s how the individual banks sort out, ranked by asset size, and reporting number of offices. I apologize for the small type; it’s a lot of information to squeeze in here.
There are four “trillion peso” banks and four “half-trillion peso” banks. In “street lingo”, the four big gorillas, representing 54% of all Universal/Commercial assets, are:
- Landbank (Gov’t)
The second tier, representing 19% of all assets, are:
- Development Bank (Gov’t)
- Security Bank
- China Bank
As we look at individual banks in detail, I suspect we will find that government bank balance sheets are very different than those of private banks, as the government banks handle CCT payouts and other agency programs.
The next step in digging deeper will be to compare the balance sheets and performance ratios of the four biggest banks.
By way of perspective, at 47 pesos per dollar, BDO, with US$ 39.0 billion in assets, would rank as the 35th largest bank in the United States based on US Federal Reserve rankings.
Erratum: With apologies, the head of the management team at BSP is Amando M. Tetangco, Jr. as Governor of BSP and Chairman of the Monetary Board.