With asset growth of 2.5 percent in 2020, the Non-Bank Financial Institutions (NFBI) sector remained resilient despite the negative impact of COVID-19 on the economy, the Non-Bank Financial Institutions Regulatory Authority says in its annual report for 2021.
Profit before tax of the NBFIs increased from P1.7 billion in 2019 to P2 billion in 2020, the recently released NBFIRA report notes. Overall return on assets increased from 6 percent in 2019 to 7 percent in 2020. The sector registered a 2.5 percent increase in assets from P126 billion in the prior year to P129 billion in 2020.
At this level, the NBFI sector accounted for 54 percent of the market share of financial sector assets, albeit this being 1 percent lower than in the prior year. In the same period, capital of the entities increased by 20 percent from P7.5 billion in 2019 to P9 billion in 2020. The liquidity position also improved as evidenced by a 10 percent reduction in liabilities from P21 billion in 2019 to P19 billion in 2020.
Overall, the NBFI sector was assessed to be stable and financially sound with no obvious vulnerabilities in the short to medium-term. Due to good performance of the foreign financial markets, retirement funds recorded an asset increase of 3 percent from P89 billion in March 2019 to P 92 billion in March 2020.
“Retirement funds continued to dominate the NBFI sector with a market share of 71 percent in 2020, going up from 70 percent registered in 2019,” says the report. “After the year-end closure, management accounts of retirement funds for the 12 months’ period ended December 31, 2020 showed that pensions had grown to P105 billion compared with P93 billion in the prior year.
“The growth was attributed to a strong performance in foreign equities and alternative investments. However, total investment income was lower by 47 percent ending the year 2020 at P6.2 billion from P11.8 billion in 2019. Total contributions to the retirement funds by both the employees and the employers increased sharply by 15 percent from P4.6 billion in 2019 to P5.2 billion in 2020, partly due to additional voluntary contributions and (a) 3 percent civil service salary adjustments.”
The report states that the offshore/onshore asset allocation was 65/35 percent in 2020 compared to 61/39 percent in 2019. Total assets for investment institutions (asset managers and management companies of CIUs) declined by 60.9 percent from P1,451.4 million in 2019 to P567.6 million in 2020 due to the reclassification of some of the financial assets as well as restructuring of the businesses of some of the major players in the market.
“Total liabilities also declined significantly by 75.8 percent from P1.1 billion in 2019 to P271 million in 2020,” NBFIRA says. “The investment institutions sector was able to preserve equity which declined by 12.1 percent from P337.6 million in 2019 to P296.6 million in 2020.”
Total Assets Under Management (AUM) for investment institutions amounted to P51.1 billion in 2020, representing a slight increase of2.5 percent from the P49.9 billion recorded in the prior period. Gross Written Premiums (GWP) for insurers (Life and General) increased by 4.6 percent from P5.4 billion in 2019 to P5.6 billion in 2020.
Expressed as a percentage of nominal GDP, the penetration ratio increased to 3.1 percent in 2020, compared to 2.7 percent in 2019. The Insurers’ total assets grew by 5.1percent from P19.4 billion in 2019 to P20.4 billion in 2020. In the reporting period, total assets of micro-lenders increased by 17 percent with the main driver of the growth being the loan book which grew by 12.8 percent in 2020 and accounts for 61.9 percent of the total assets increase. The industry also experienced growth in liabilities by 20.7 percent.
The NBFIs are classified broadly under four sectors, namely Capital Markets, Retirement Funds, Insurance and Non-Bank Lenders. The sector continues to be dominated by retirement funds whose market share of NBFI assets accounted for more than 70 percent at P92 billion in 2020. NBFIRA) was established as an independent regulatory agency for non-bank financial institutions in April 2008.