CEBU'S banking system remains “stable and sound” amid the financial storm that rocked the global economy in 2008.

In the first semester this year, the Cebu Bankers Club (CBC) reported an increase in deposits and loans volume despite the global financial slowdown.

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Without stating figures, CBC president John H. C. Salas said this was due to the move of retails banks to shift from complex products back to the basic banking business of deposit taking and lending.

Growth

“In so doing, Cebu was set up for growth as Cebu is structurally fitted for these activities,” he told Sun.Star Cebu in an e-mail.

Apart from investors' aversion toward equities and others perceived as riskier investment outlets, he said Cebu is historically known for high bank density and more as a deposit-generating area rather than a borrowing area.

“Being a highly populous and urbanized area, Cebu has a high density of bank branches. As banks aggressively look for deposits, Cebu naturally gathers more than its neighboring provinces due to its vast branch network,” he explained.

Salas said that despite being an urbanized province, Cebu posted low loans-to-deposits ratio.

He said that as of June 2008, Central Visayas' loans-to-deposit ratio was only 23.80 percent compared to National Capital Region's (NCR) 93.20 percent. On average, all other region's loans-to-deposit ratio is 24.32 percent.

“This means that for every P100 of deposits gathered, only P23 is lent out in Central Visayas; while in NCR, P93 is lent out for every P100 deposits gathered,” Salas said.

Shift

He added that loans volume in Cebu is also growing as banks are shifting their asset portfolios from complex and exotic structured products to traditional domestic loans.

“This gives branches more impetus to tap loan clients, especially those consumption-oriented loans such as auto, housing, and credit cards,” he said.

In a Bangko Sentral ng Pilipinas (BSP) Status Report on the Philippine Financial System for January to June 2009, the central bank noted that the performance of the country's banking system has offered a “silver lining” amid the economic storm.

“Key performance indicators for the first half of 2009 showed the sustained strength of banks' core balance sheet accounts: steady asset expansion, double-digit credit growth, growing deposit base, ample liquidity, continuing improvement in overall asset quality, and above standard solvency ratios,” the BSP said in its report released last Nov. 3.

CBC, though, raised the need for depositor protection. One way to address this, the group said, is through Senate Bill 871 that calls for amendments to the BSP charter intended to address problematic banks.

To move forward, the BSP recommended banks to be equipped with adequate capital to ride out potential losses in their operations and to adopt e-banking technologies, among others.

As of June 2009, there were 804 banks with 7,094 branches operating in the country.