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Philippines: Top bank execs forecast robust earnings growth
MANILA, Philippines — Top bank executives are maintaining a double-digit growth in the industry’s profits, assets, deposits and loans this year, results of the Banking Sector Outlook Survey (BSOS) of the Bangko Sentral ng Pilipinas (BSP) showed.
About 70.2 percent of the respondents, which include presidents and CEOs, expect the Philippine banking system to remain stable, with the rest mostly expecting a stronger banking sector.
The survey conducted by the BSP’s supervisory policy and research department showed the banks’ bullish projections likewise elicited buoyant expectations on returns as 92.4 percent of the respondents forecast double-digit income growth for the next two years compared to 83.3 percent of the respondents during the first semester.
Among the universal and commercial banks (U/KBs), the BSP survey showed 36.4 percent expect net income growth between 10 and 15 percent, while 30.3 percent project net profit to grow more than 30 percent.
“The U/KBs’ net income projections are significantly influenced by new foreign bank entrants that are still setting the foundation for their strong domestic presence,” the BSP added.
The regulator said thrift or mid-sized banks are the most optimistic with 97 percent expecting double-digit net income growth.
It added the projected net income growth is expected to bring return on equity (ROE) between five and 10 percent by most respondents among banking groups, while 35 percent of the foreign banks project ROE at less than five percent.
“This may be attributed to a different business model, i.e., to facilitate their respective parent bank’s and clients’ global transactions within the domestic market,” the BSP explained.
Earnings of Philippine banks jumped 28.4 percent to P57.06 billion in the first quarter of the year from P44.42 billion in the same quarter last year. Big banks booked a 24.5 percent increase in net income to P49.54 billion from P39.77 billion, enough to offset the 11.8 percent decline in the earnings of mid-sized banks to P3.57 billion from P4.05 billion.
Likewise, the BSP said upbeat projections led more than 72 percent of respondents to expect double-digit growth in assets and deposits.
Latest central bank data showed the assets of Philippine banks increased by 10.9 percent to P17.38 trillion in end March this year from P15.67 trillion in end March last year.
The survey showed 81 percent of the respondents expect at least a 10 percent growth in their loan books.
Likewise, the BSP added the upgrade of the Banking Industry Country Risk Assessment (BICRA) of the Philippines to Group 6 from Group 7 by S&P Global Ratings amid improved credit fundamentals through the establishment of credit bureaus and improvement in the underwriting practices of the consumer loans segment contributed to the optimism.
The survey covered president, CEOs and country managers of all big and mid-zed banks as well as the top 20 rural and cooperative banks. It aims to serve as a measure of proactive and forward-looking approach to surveillance and financial supervision.
Survey results also showed that banks maintain their optimism on the country’s economic prospects as 86.1 percent of respondents expect the domestic economy to grow between six and seven percent within the next two years.
Source: https://www.philstar.com/business/2019/06/14/1926170/top-bank-execs-forecast-robust-earnings-growth#Prqll7276kJIlZfI.99