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Philippines banking sector outlook improving – Fitch
The Philippine banking sector’s outlook is improving, as lenders’ financial performance and the economy are expected to improve this year, according to Fitch Ratings.
“For the Philippines, we have an improving banking sector outlook as we expect financial performance to recover somewhat this year, in tandem with a pickup in economic activity that we expect,” Tania Gold, senior director and head of South and Southeast Asia Banks at Fitch Ratings, stressed during a virtual conference on Tuesday.
She went on to say that loan growth in the country should accelerate, more than offsetting any margin pressure that may arise as a result of excess liquidity in the market.
Accelerated loan growth, combined with still-high, but lower-than-last-year impairment charges, should result in improved overall profitability this year, emphasized.
“But the rating outlook for the Philippine banks that we cover are negative, as these banks are all government-support driven and we currently have the sovereign rating on a negative outlook,” she, however, warned.
Gold did not elaborate, but Fitch Ratings has projected that the Philippine gross domestic product will grow by 6.6 percent this year, which is lower than the government’s forecast of 7 to 9 percent.
Meanwhile, according to the latest data from the Bangko Sentral ng Pilipinas, bank loans increased by 4 percent in November 2021, up from a 3.5-percent uptick the month before. Due to the lifting of Covid-19 restrictions and the continuous distribution of vaccines, the central bank said outstanding loans of universal and commercial banks are gaining traction amid enterprises’ optimistic economic outlook.
Fitch Ratings tweaked the outlook on many Philippine banks’ credit ratings to negative in July of last year, based on its “assessment of the state’s weakening ability to support the bank.”
It said the negative outlooks mirror a similar lower revision in the Philippines’ sovereign rating outlook, citing higher risks to the country’s credit profile from the impact of the Covid-19 pandemic and its aftermath on policymaking, economic and fiscal results.
According to the credit rating agency, the Philippines’ medium-term development prospects are at risk as a result of potential scarring effects and issues connected with unwinding the unprecedented policy response to the health crisis and restoring healthy public finances as the pandemic subsides.
Source: https://www.manilatimes.net/2022/01/19/business/top-business/ph-banking-sector-outlook-improving-fitch/1829855