Number of banks down in H1 due to mergers

By Lawrence Agcaoili , The Philippine Star

Posted at Aug 29 2010 01:58 PM | Updated as of Aug 29 2010 09:58 PM

MANILA, Philippines - The number of banks nationwide declined by 31 in the first half of the year, indicating the continued consolidation of banks, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP said the number of banking institutions reached 773 in the first six months of the year from 804 in the same period last year, and 6 banks fewer than the end-March number of 779.

The BSP said the number of banks continued to decline due to mergers and consolidations as well as the exit of weaker players in the banking system.

Data showed that the number of universal and commercial banks remained at 38, while the number of thrift banks was also unchanged at 74.

However, the number of rural banks fell to 661 from January to June this year, compared to 692 a year ago, due primarily to the closure of several banks including those under the controversial Legacy Group.

The BSP reported that the number of branches of universal and commercial banks, thrift banks and rural banks increased by 765 to 8,663 in the first semester of the year from 7,898 in the same period last year.

Earlier, BSP Deputy Governor Nestor Espenilla Jr. cited studies showing that there are still too many universal and commercial banks considering the size of the country’s economy.

“In fact you wouldn’t say that the banking industry in the Philippines is very concentrated to begin with. Lending agencies even say that the industry is fragmented because for the size of the economy, there is still too many commercial banks at 38,” he stressed.

The BSP and state-run Philippine Deposit Insurance Corp. (PDIC) recently launched a P5- billion incentive scheme to spur mergers and consolidations in the country’s rural banking industry under its Strengthening Program for Rural Banks (SPRB).

This early, at least 28 investors have lined up to acquire ailing rural banks under the SPRB that involves a P5-billion financial assistance as well as grant of regulatory relief by the PDIC and BSP over a period of two years to encourage mergers and consolidations of rural banks to further strengthen the rural banking system.