By Pierce Oel A. Montalvo, Researcher

THE COMBINED ASSETS of the Philippines’ largest banks grew by nearly 10% in the first quarter compared with a year earlier, driven by lower interest rates.

In the latest edition of BusinessWorld’s quarterly banking report, the aggregate assets of 44 universal and commercial banks rose by 9.51% year on year to P26.84 trillion in the first three months of 2025, higher than P24.51 trillion in the same quarter in 2024.

However, this pace was slower than the 10.02% logged in the fourth quarter.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed banks’ combined assets rose by 5.5% to P26.89 trillion as of end-April from P25.48 trillion in the same period a year ago. (Related story: Banks’ assets rise to P26.89 trillion at end-April).

Meanwhile, total loans of these big banks expanded by 13.46% to P14.03 trillion in the January-to-March period, a tad faster than the 12.32% posted in the same period a year earlier.

Quarter on quarter, loan growth slowed from 13.59% in the fourth quarter of 2024.

The growth in both assets and loans may be attributed to slowing inflation, which prompted the BSP to continue its easing cycle. Lower interest rates make borrowing cheaper, meaning more individuals and businesses will take out loans, leading to increased lending activity.

Inflation averaged 2.2% in the first quarter, within BSP’s target of 2-4%.

The BSP reduced interest rates by a total of 100 bps since it began its easing cycle in August last year. It kept the benchmark rate at 5.75% during its February meeting but further slashed it by 25 bps to 5.5% in April.

Nonperforming loans (NPL) ratio, or the share of bad loans to the total loan portfolio stood at 3.16% in the first quarter.

While this was higher than the 3.11% in the fourth quarter of 2024, the NPL ratio was slightly lower than the 3.6% posted in the same period last year.

Loans are considered nonperforming if the principal and/or interest are unpaid for more than 90 days from the contractual due date. These may pose risks to the lenders’ asset quality as borrowers are likely to default on these debts.

On the other hand, the net NPL ratio eased to 1.42% from 1.5% posted a year earlier.

Meanwhile, the bank’s median return on equity (RoE), an indicator of profitability, fell to 7.3%, from the 8.01% posted in the same period a year ago.

The RoE or the ratio of net profit to average capital, measures the amount that shareholders make on every peso they invest in a company.

Additionally, these big banks’ median capital adequacy ratio, which reflects the lender’s ability to absorb losses from risk-weighted assets, reached 19.71% during the period.

This was slightly higher than 19.64% in the first quarter of 2024, but lower than 20.73% in the fourth quarter.

The ratio remained well above the 10% regulatory minimum set by the central bank as well as the 8% international minimum standard under the Basel III framework.

The leverage ratio, which gauges the institution’s ability to absorb shocks by measuring the bank’s capital relative to total exposure, stood at a median of 11.27% during the period.

The current figure exceeded the central bank’s 5% guideline as well as the international standard of 3%.

During the period, the big banks’ net interest margin hit 3.76% from 3.32% a year earlier. This is an indicator of banks’ investing efficiency by dividing annualized net interest income by average earning assets.

Meanwhile, return on assets, which measures the profit generated per peso of an asset, climbed to 1.71% in the first quarter from 1.6% a year earlier and 1.55% from the last three months of 2024.

LARGEST BANKS
In the first quarter, BDO Unibank, Inc. (BDO) remained the largest bank by total assets with P4.83 trillion, followed by Metropolitan Bank & Trust Co. (Metrobank) with P3.51 trillion and Land Bank of the Philippines (LANDBANK) with P3.45 trillion.

The Sy-led bank also kept its lead in total loans, issuing P3.25 trillion in the first quarter. This was followed by Bank of the Philippine Islands (BPI) with P2.29 trillion and Metrobank with P1.83 trillion.

In terms of deposits, BDO also led the industry with P3.84 trillion, followed by LANDBANK with P3.03 trillion and BPI with P2.58 trillion.

Among banks with assets of at least P100 billion, Security Bank Corp. posted the fastest year-on-year asset growth of 32.7%, followed by Citibank NA (24.71%), and Rizal Commercial Banking Corp. (17.3%).

In terms of loan growth, Asia United Bank Corp. was the most aggressive lender during the period, with loan growth at 33.51%, followed by China Banking Corp. (18.47%) and Security Bank Corp. (18.42%).

BusinessWorld Research has been tracking the financial performance of the country’s large banks quarterly since the late 1980s using banks’ published statements.