MARAWI CITY - Philippines troops found bundles of bank notes and checks worth about $1.6 million abandoned by Islamist militants holed up in Marawi City, a discovery the military said on Tuesday was evidence that the fighters were pulling back.

Fighters linked to the Islamic State group have been cornered in a built-up sliver of the southern lakeside town after two weeks of intense combat. The military said that over the past 24 hours it had taken several buildings that had been defended by snipers.

In one house they found a vault loaded with neat stacks of money worth 52 million pesos ($1.1 million) and checks made out for cash worth 27 million pesos.

"The recovery of those millions of cash indicates that they are running because the government troops are pressing in and focusing on destroying them," Marines Operations Officer Rowan Rimas said in the city as helicopters on machine-gun runs buzzed overhead.

Black smoke poured from an area near one of the town's mosques and the lake after bombings by OV-10 attack aircraft and artillery fire from the ground.

The battle for Marawi has raised concerns that the ultraradical IS group, on a back foot in Syria and Iraq, is building a regional base on the Philippine island of Mindanao.

Officials said that, among the several hundred militants who seized the town on May 23, there were about 40 foreigners from neighboring Indonesia and Malaysia but also from India, Saudi Arabia, Morocco and Chechnya.

The fighters prepared for a long siege, stockpiling arms and food in tunnels, basements, mosques and religious schools, military officials said. The Philippines is largely Christian, but Marawi City is overwhelmingly Muslim.

Progress in the military campaign has been slow because hundreds of civilians are still trapped or being held hostage in the urban heart of the town, officials have said.

"In a few days, we will be able to get everything, we will be able to clear the entire Marawi City," armed forces Chief of Staff General Eduaro Ano said in a radio interview.

Fighting erupted in Marawi after a bungled raid aimed at capturing Isnilon Hapilon, whom Islamic State proclaimed as its "emir" of Southeast Asia last year after he pledged allegiance to the group. The US State Department has offered a bounty of up to $5 million for his arrest.

On Monday, President Rodrigo Duterte offered a bounty of $200,000 to anyone who "neutralized" Hapilon.

Reuters