Growth of Universal Banking in the Philippines: A Correlational Study with Economic Growth

Antonio J. Dayag and Fernando Trinidad
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Antonio J. Dayag: University of Sto. Tomas (UST), Espana, Manila
Fernando Trinidad: University of Sto. Tomas (UST), Graduate School, Manila

International Journal of Finance & Banking Studies, 2019, vol. 8, issue 3, 66-76

Abstract: The purpose of this paper is to determine whether universal banks’ profitability performance impact GDP growth in the Philippines, from 2010 to 2018. Banks are believed to instrumental to economic growth because it provides the financial backbone needed to spur economic development through business creation and expansion. A healthy and resilient banking sector signals economic growth and development that is sustainable. The efficient transfer of funds from those that has surplus of them towards those that need them has been made possible due to the intermediation of banks. In the Philippines, banking formally started in 1851 with the establishment of the Bank of the Philippine Islands, which up to this day, stands to be one of the country’s biggest and most stable universal bank. This study analyzes how universal banks grew over the years, and determines whether a correlation exists between universal bank growth and economic growth, using the variable of GDP growth rate as proxy for economic growth. The study showed that at the most recent periods, universal banks’ ROE and ROA are weakly and negatively correlated with GDP growth rate.

Keywords: Universal banks; History of banking; Economic growth of the Philippines; GDP growth (search for similar items in EconPapers)
Date: 2019
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