At the top: Profiles of the six biggest banks

While there may be more than 700 banks in the Philippines, the six largest account for more than 60% of total assets. Despite the fact that many lenders around the world have taken a hit due to the global economic slowdown, most of the banks in the Philippines are doing quite well, posting good numbers in 2011. Moreover, the country’s banks are stable, with capital adequacy ratios (CARs) well above the required minimum, and plentiful liquidity. As ranked by assets, the following are currently the six largest banks in the country.

Banco De Oro Unibank (BDO)

As of September 2011 BDO, a full-service universal bank and a member of the San Miguel (SM) Group, one of the largest conglomerates in the Philippines, was the country’s largest bank in terms of total resources, customer loans, total deposits and assets under management. The bank has risen to the top in part due to its merger with another lender, Equitable PCI Bank, in 2006. BDO reported net income of P7.6bn ($172.5m) for the first nine months of 2011, up 19% from the P6.4bn ($145.3m) it earned for that period in 2010.

BDO’s lending operations posted above-industry growth rates, with gross customer loans increasing by 24% to P620.8bn ($14.1bn) in the first three quarters, compared to a 19% industry average.

The bank also reported that total deposits increased 15% to P820.6bn ($18.6bn) on the back of low-cost deposits generated from an expanded branch network. According to a company statement in November 2011, despite these positive results for the first nine months of 2011, the bank will maintain a cautious stance in 2012 due in part to the economic conditions in the EU and US.

In a bid to increase the bank’s CAR to cope with any rise in loan demand, in October 2011 BDO sold P6.5bn ($147.6m) worth of debt notes qualifying as Tier 2, meaning supplementary capital, completing its P15bn ($340.5bn) Tier 2 capital build-up programme. In a press release, BDO said that this issuance would “supplement the bank’s capital position and support its business expansion plans”.

Metropolitan Bank

Metrobank, which was founded in 1962, is the country’s second-largest bank in terms of assets. Metrobank ended the third quarter of 2011 with total assets of P916.1bn ($20.8bn), and retained the top spot in terms of equity at P104.2bn ($2.4bn), according to a company statement. The bank reported consolidated net income of P8.9bn ($202m) for the first nine months of 2011, representing a 47.6% increase over the P6bn ($136.2m) earned for the same period in 2010. As a result, annualised return on average equity improved from 10% to 12.3%.

For the third quarter alone, net income grew 52.8% to P2.8bn ($63.6m), from the P1.8bn ($40.9m) earned in the same quarter in 2010. The bank reported that despite competitive pressures, the net interest margin showed a slight improvement from 2010, thanks to the 14.8% expansion seen in loans and receivables to P432.8bn ($9.8bn), coupled with migration towards a more favourable mixture of deposits.

Metrobank has built up a large consolidated network of over 1400 ATMs, more than 760 domestic branches and 38 foreign branches, subsidiaries and representative offices. The lender has been expanding internationally and plans to continue to set up operations overseas. In 2010 Metrobank inaugurated its wholly owned subsidiary, Metropolitan Bank China, which is located in Nanjing.

Bank Of The Philippine Islands (BPI)

The oldest bank in the Philippines, celebrating its 160th anniversary in 2011, BPI is owned by Ayala Corporation, the country’s largest conglomerate. The bank is the third-biggest lender in terms of assets and reported year-to-date net income of around P9.8bn ($222.5m) in September 2011. Major events for the bank in 2011 included the completion of its acquisition of the trust and investment management business of ING Bank Manila. As a result of this purchase, BPI has become the manager, advisor and administrator of 32 investment funds. The lender has the largest branch network in the country, with 700 branches, as well as the largest client base. About 1m of its depositors are overseas Filipino workers.

Land Bank Of The Philippines

The largest government-owned bank, Land Bank is also one of the biggest government-owned and controlled corporations in the country. The lender, which ranks fourth in the Philippines in terms of deposits, loans, assets and capital, has an extensive rural branch network. It services many rural clients in areas where banking is either limited or non-existent.

While it provides the services of a universal bank, it is officially classified as a “specialised government bank” with a universal banking licence. As of September 2011, its total loans stood at P237.5bn ($5.4bn), a 20% year-on-year increase. Similarly, the bank’s deposits grew 15.3% over this period, reaching P459.6bn ($10.4bn) in September 2011.

In a bid to spur consolidation within the industry, the bank has committed P1.3bn ($29.5m) worth of loan and equity support to cooperative banks that undertake mergers, according to a press release issued in November 2011.

Of this total, P1bn ($22.7m) will be available for loans to stronger industry players that acquire the weaker ones. The balance will be in the form of equity investments that Land Bank is planning to inject into the surviving entities among cooperative banks that are planning to merge.

Philippine National Bank (PNB)

Owned by the Lucio Tan Group, PNB performed well in 2010, with its annual net profit reaching P3.5bn ($79.5m), a 61% increase over the previous year.

However, for the six months of 2011, the bank reported a consolidated net income of P1.2bn ($27.2m), a fall of 33% from the net income for the same period in 2010. The company attributed this decline mainly to seeing relatively lower gains from trading and investments securities.

PNB and Allied Bank are expected to complete their long-delayed merger in 2012, which was initially announced in 2008. The merged entity will have one of the most extensive distribution networks amongst local banks.

A major stumbling block to the deal was resolved in December 2011 when Allied Bank received the approval of the US Federal Reserve to divest its indirect stake in California-based Oceanic Bank, a move that is required before it can finally merge with PNB. The merger was announced in 2008, but the deal was on hold due to US banking regulations that restrict entry by foreign banks – in this case meaning PNB, the surviving entity after the merger with Allied Bank was finalised.

“In light of recent approval by the Fed allowing the shares owned by Allied Bank in Oceanic Bank Holding Inc. to be placed in trust with a designated and qualified trustee for sale or disposition to third parties, the bank is now vigorously pursuing its merger plans with PNB,” Allied Bank said in a disclosure to the Philippine Stock Exchange. RIZAL COMMERCIAL BANKING CORPORATION (RCBC): Along with its thrift bank subsidiary RCBC Savings Bank, RCBC has a formidable footprint in the Philippines, with more than 350 branches nationwide.

The lender is also a major player in the remittance business, with more than 180 locations spread across Asia, the Middle East, the US, Canada and Europe. RCBC, which is part of the multi-industry conglomerate Yuchengco Group, posted P4.1bn ($93.1m) in net income for the first nine months of 2011, a rise of 11.4% over the P3.7bn ($84m) earned during the same period the prior year.

Total consolidated assets reached P311.7bn ($7.1bn) in the third quarter of 2011 and loans grew to P166.9bn ($3.8bn), as the corporate loan book rose by 15.5% and the small and medium-sized enterprise loan book by more than 23.5%. The non-performing loan ratio also fell to 2.1% in September 2011, down from 5.5% in the prior year, which should put RCBC in good stead for developing in the future.