MANILA, Philippines — Top executives of Philippine banks are expecting a double-digit growth in lending and earnings over the next two years as the country further recovers from the impact of the pandemic.
The results of the latest Banking Sector Outlook Survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed that 70.7 percent of the responding presidents, CEOs, and country managers expect a double-digit growth in banks’ loan portfolio in the next two years.
This was higher than the 60.5 percent growth recorded in the first semester 2021 survey.
Universal and commercial banks are projecting a loan growth of between five and 10 percent, while rural and cooperative banks are expecting 10 to 15 percent.
On the other hand, the survey showed that thrift banks and foreign banks are more optimistic with a stronger credit growth of more than 20 percent.
“The progress in the country’s vaccination program and better growth prospects are expected to sustain loan growth as this would lead to consumer and business confidence and higher loan demand,” the BSP said.
Latest data from the central bank showed big banks reported a 12-percent increase in loan disbursements to P10.21 trillion in end-July from P9.12 trillion in end-July last year despite the aggressive rate hikes by the BSP.
The BSP said the uptick in economic activities has eased concerns regarding the quality of bank loan portfolio.
Despite the sustained credit growth, the number of respondents expecting the industry’s non-performing loan (NPL) ratio exceeding five percent in the next two years went down to 57.3 percent from 63.5 percent in the second semester of 2020.
Likewise, 30.1 percent of respondent banks expect a restructure loan ratio of more than five percent, demonstrating the propensity of the sector to modify the terms of the loan for borrowers facing financial stress due to the pandemic and natural disasters.
Preliminary data from the central bank showed the industry’s NPL ratio eased for the fourth straight month to a 21-month low of 3.6 percent in June from 3.75 percent in May. The ratio peaked at a 13-year high of 4.51 percent in July and August last year.
The respondent banks are also expecting a double-digit growth in assets on the back of sustained economic growth and stable outlook on the country’s banking system.
Likewise, the survey revealed that 77.6 percent of the responding bank executives forecast double-digit increase in net income for the next two years, higher than the previous 70.6 percent.
“More banks set upbeat expectations on their profitability,” the central bank said.
In particular, 40 percent of foreign banks, 34.4 percent of mid-sized banks, and 27.8 percent of big banks expect the growth in their earnings to be higher than 30 percent for the next two years.
Almost seven of 10 banks or 69.2 percent estimate a net interest margin to hit between three and 20 percent this year.
According to the results of the latest survey, more bank respondents (48.3 percent) expect the country’s gross domestic product (GDP) growth to accelerate to above six percent this year from 5.7 percent last year.
“Banks shared more optimistic views regarding the country’s economic prospects compared to last year,” the BSP said.
About 25.2-percent see the GDP expanding between six and 6.3 percent, while 23.1 percent of the respondents believe the country’s GDP would grow by more than seven percent.
Big banks are looking at a six to seven percent GDP expansion, while mid-sized and small banks are looking at a slower growth of between 4.3 and 5.9 percent this year. On the other hand, 36 percent of foreign banks see the GDP growth between six and 6.3 percent.
The country’s GDP expanded by 7.8 percent in the first half despite the disappointing 7.4-percent growth in the second quarter, slower than the 8.2- percent recorded in the first quarter.
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The article was originally published in PhilStar Global and written by Lawrence Agcaoili.
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