BSP: More sales, more lending

Revia Mae E. Sibal & Lorrianne Aryenz V. Valdecantos | February 6, 2018

Photo from International Business Times

Philippine companies remain unshaken by the risks from their expansions funded by loans as their revenues continue to rise through the years.

Country’s largest corporation’s rate of borrowing slowed down last 2016 compared to the previous years.

BSP-monitored data from a sample of non-financial corporations showed that for the past 10 years, the demand from borrowing continues to rise until it slowed down 2 years ago. Philippine firms’ debt-to-equity ratio went downhill from 116.8 percent in 2014 to 114 percent by the end of 2016.

“The rise in borrowing activities was accompanied by improving ability to generate profit, with the return-on-equity ratio nearly steady at 15 percent to 16 percent over the past four years.” as Bangko Sentral ng Pilipinas Governor Nestor Espenilla, Jr. pointed out.

Too much debt from conglomerates imposes future risks in the financial stability of the country. Thus, the BSP is requiring regulators to keep a close eye on the status of the banks as well as its constituents.

“The BSP adopts a uniform stress test, which involves simulating the impact of credit and market risks on the regulatory capital ratios of banks, based on these stress tests, the Philippine banking system continues to be resilient to a 20-percent write-off on their exposure to the top 20 conglomerates, with their respective stressed capital adequacy ratios still above the 10-percent minimum requirement.”, said the chief in an interview.

The results are comforting to know that there will be resilience in the banks against large conglomerates.