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

Author

Listed:
  • Antonio J. Dayag

    (University of Sto. Tomas (UST), Espana, Manila)

  • Fernando Trinidad

    (University of Sto. Tomas (UST), Graduate School, Manila)

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.

Suggested Citation

  • Antonio J. Dayag & Fernando Trinidad, 2019. "Growth of Universal Banking in the Philippines: A Correlational Study with Economic Growth," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 8(3), pages 66-76, July.
    • Handle: RePEc:rbs:ijfbss:v:8:y:2019:i:3:p:66-76
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    References listed on IDEAS

    as
    1. Abugamea, Gaber, 2016. "اثر التجارة الخارجية على النمو الاقتصادي و التنمية في فلسطين: 1995 -2012 [The Impact of External trade on Economic Growth and development in Palestine: 1995-2012]," MPRA Paper 89745, University Library of Munich, Germany.
    2. Abedalfattah Zuhair Al-abedallat, 2017. "The Role of the Jordanian Banking Sector in Economic Development," International Business Research, Canadian Center of Science and Education, vol. 10(4), pages 139-147, April.
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    4. Abugamea, Gaber, 2016. "Banking Sector Development and Economic Growth in Palestine; 1995-2014," MPRA Paper 89781, University Library of Munich, Germany, revised 26 Feb 2016.
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