Connect with us

Hi, what are you looking for?

News

Improving margins to boost Philippine banks’ profitability, Fitch Ratings says

THE COUNTRY’S big banks will continue to see improved profitability for the rest of the year on better margins following the central bank’s tightening, Fitch Ratings said.

“The solid financial performance of the Philippines’ large banks in 1H22 reflects continued improvement in loan demand, with system loan growth reaching the fastest pace since the onset of the COVID-19 pandemic at 9.1% year on year,” the debt watcher said in a report written by Fitch Asia-Pacific Financial Institutions Directors Willie Tanoto and Tamma Febrian dated Aug. 25.

“We expect credit growth to taper in 2H22 as demand is curbed by inflation and a 175-bp (basis point) year-to-date increase in the policy rate. However, banks’ earnings should be supported by wider lending margins as variable rate loans are repriced. We have maintained our improving outlook on the banking sector against the backdrop of rising returns,” Fitch said.

Philippine banks’ improving profitability is positive for their standalone credit profiles, the debt watcher said. Still, this does not strengthen their issuer default ratings, as this is sensitive to changes in the sovereign’s “BBB” rating, which has a “negative” outlook.

Fitch said banks’ interest margins and profits have yet to reflect most of the Bangko Sentral ng Pilipinas’ (BSP) rate increases as it began to tighten only in May.

“Further improvement, nevertheless, may be tempered by rising loan competition, especially within the corporate sector that remains the dominant segment of the banks’ loan portfolio, as the banks’ risk appetite returns,” it said.

Funding costs also remain low amid high levels of liquidity in the system, which will support banks’ loan growth, Fitch said.

It said it expects banks’ capital levels, which have declined due to faster loan growth and revaluation losses on banks’ bond holdings, to remain steady “as stronger profits lead to capital accretion.”

However, rising inflation, which may affect consumers’ purchasing power and, in turn, the economy’s recovery, could result in weaker asset quality for lenders.

“Non-mortgage consumer lending is among the most vulnerable to impairments, but we expect the rated large private banks to weather incremental weakness in loan quality relatively well, helped by their loan loss coverage ratios of 138%-196%,” the debt watcher added.

Latest BSP data showed outstanding loans by big banks, net of reverse repurchase placements with the central bank, rose by 12% in June to P10.19 trillion in the same month last year.

As lending growth continued to pick up, M3 — the broadest measure of liquidity in an economy — expanded by 6.9% to P15.4 trillion in June. — K.B. Ta-asan

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

PHILIPPINE STAR/ MICHAEL VARCAS WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global...

News

Buildings are seen along EDSA in Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded...

News

Heavy traffic is seen on the southbound lane of EDSA in Cubao, Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN THE PHILIPPINE auto industry’s...

News

REUTERS THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected...

News

Vendors arrange their goods at a public market in Manila. — PHILIPPINE STAR/ RUSSEL A. PALMA THE ASIAN Development Bank (ADB) is planning to...

Editor’s Pick

With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.