Questions
1. Based on the modules discussed, is the 2.08% increase in the capitalization a good indication to
the banking sector? Explain your answer.
2. Will the lowering loan portfolio affect the liquidity position of banks given that deposits are
increasing? Explain your answer.
3. Why do equity holders care more about ROE than ROA?
4. If a bank has a shortage in its capital position, what actions can it do to help improve the
standards? Give a maximum of 3 actions and briefly explain each.
5. If a bank finds its ROE is too low because it has too much bank capital, what can it do to
raise its ROE?
6. Why are banks counseled not to lend money on the strength of the borrower's collateral
alone?
Asset growth The banking sector's total assets also grew In April. reaching P1356 trillion from P18." trillion a month ago. Ricafort explained this was driven by the 1.8-percent month-on-month increase in total deposits amounting to Iii-4.11:I trillion in April. "Many businesses. households. and other Institutions mostly adopted a more conservative stance by Increasing their cash positions and deposits." he said. This was to "better weather the unprecedented iockdown of the local economy as a matter of prudence." Rlcafort said. The banking industry is holding cash amounting to P19? trillion as of end-April. Article Analysis: Answer the questions below regarding the article provided Banking industry sees uptick in Capitalisation Hy Tyrone Jasper l2. Pied; June 13, 1020 The banking sector booked an increase in its capital accounts recently due to higher investments delivering more trading gains. According to recent data from the Bangko Sentral ng Pilipinas [ESP], the industry's capitalitation reached P235 trillion in April, which is 2.08 percent higher than P235 trillion a month ago and 8.9 percent more than P116 trillion the year earlier. RCBC Chief Economist Michael L. Ricaiort attributed this to the P52 billion month-on-month increase in total investments. "This may reect [an] increase in total Investments amid hefty gains in the local financial markets. especially trading gains in the fixed income marketr'bonds locally as well as in the US [United States] and in other developed markets," Ricafort said. Total investments reached P4.18 trillion in April, according to ESP preliminary data. These Include nancial assets and equity investment in subsidiaries, associates and joint ventures amounting to P332 trillion and P261.36 billion, respectively. UnlonBani: Chief Economist Ruben Carlo 0. Asuncion, meanwhile, said that it was "clear that banks have been responding to the [public health] crisis and have increased and adjusted their capital funding." "Furthermore, well-capitalized banks can serve as a source of strength for the economy in good times and bad," Asuncion added. He explained that research suggests that capital hike is associated with increase in loan growth and better capitalized banks expand lending more quickly. However, he noted that demand for loans are currently low as government imposed stern measures to curb the spread of the coronavirus. In April, the total loan portfolio of the banking system reached P1033 trillion, which is slightly lower compared to P103? trillion a month ago. With businesses scaling down operations, Ricafort said that demand for loans declined as well as trimming of capital expenditures. "However, reiasation of the lockdown since the second half of May 2020 with some businesses allowed to gradually re-startfre-open could lead to some pick-up in economic activities as well as some pick up in loan demand," he added
