Philippine rural banks remain flush with money despite back-to-back branch closures

The sector’s assets rose 8.3% to $4.02b as of end-March.

Assets held by rural banks in the Philippines rose by 8.3% YoY to $4.02b (PHP216.7b) in March, according to central bank data, pointing to the strong liquidity positions of the country’s rural lenders even amidst consecutive rural bank shutdowns. 

Also read: Philippine banking assets up 12.2% to $292.95b in May

Rural banks provide a unique function in the Philippines as they provide financial services to far-flung communities, farmers and small businesses that cannot be served by incumbent commercial players with a retail network that spans 2,800 branches.

The Monetary Board has shut down a total of 10 rural banks so far in 2018 with the Loan Bank Inc and Rural Bank of Luna (Apayao) being the latest casualties after they were forced to wave the white flag due to ‘unsound financial condition.’ 

Nevertheless, the central bank believed the Philippine rural bank industry remains on solid financial footing and that the outlook is positive with a return on equity at a healthy 7.1%.

Rural banks also booked a cumulative net income of $53.76m (PHP2.9b) in Q1 and hold capital worth 19.1% of their risk-weighted assets - way beyond the 10% minimum capital adequacy ratio requirement.

Total loans extended by rural banks in the Philippines also rose 5.4% YoY to $2.51b (PHP135.3b) as of March.

The central bank earlier approved the relaunch of the Consolidation Program for Rural Banks (CPRB), an initiative that aims to encourage mergers and consolidation amongst rural banks which would be available for two years, from Oct. 26, 2017 to Oct. 26, 2019.

Photo from Mjdiamzon - Own work, CC BY-SA 4.0