Philippine banks are seeing double-digit growth in assets, loans, deposits and net income for the next two years as they expect the economic recovery to continue, Bangko Sentral ng Pilipinas (BSP) said on Tuesday. .

The results of BSP’s Banking Sector Outlook Survey (BSOS) for the second half of 2021 showed that banking sector executives are optimistic about their operations as they are optimistic about the country’s economic prospects.

Survey respondents are chairmen, managing directors, national directors of all universal, commercial and savings banks, and 80 rural and cooperative lenders in the country which accounted for 94.4% of total banking sector assets. at the end of December 2021. .

They were asked about their growth prospects, risk assessment and business strategies over a two-year period. The survey is part of the BSP’s surveillance toolkit to help improve the resilience of the banking system.

Excluding the impact of the Russian-Ukrainian war and inflation-related developments, banks expect the Philippines’ gross domestic product (GDP) to exceed 6%, according to the survey results.

“More banking respondents (48.3% of respondents compared to 35.4% at end-December 2020) expect GDP to improve above 6%. Of these respondents, 25.2% expect GDP growth of between 6% and 6.3%, while 23.1% of survey participants expect GDP growth of more than 7%,” said the BSP.

“The banks’ level of optimism about the country’s economic outlook is also reflected in their overall outlook for the Philippine Banking System (PBS) with expectations for double-digit growth in assets, loans, deposits and net income.” , he added.

The BSP said that in terms of loan quality, a lower number of respondents or about 57.3% compared to 63.5% in the previous survey estimate a non-performing loan (NPL) ratio above 5% over the course of the year. of the next two years.

The survey results showed that Universal and Commercial Banks (U/KB) expect their NPLs to be only 2-3% of their total loans compared to the 3-5% ratio they had planned in the survey for the Iffirst half of 2021.

However, most savings banks (TB) and rural and cooperative banks (RCB) still expect high NPL ratios with only marginal improvement in the latest survey.

The latest data from the central bank showed that the Philippine banking sector’s gross NPL ratio fell to 3.6% at the end of June, from 4.48% a year ago and 3.75% in May.

At the same time, 42.7% of respondents expect an NPL coverage rate of 51% to more than 100%. The rest of the respondents see a ratio of 50% and less.

Banks also have mixed projections on restructured loans, the BSP said.

Around 30.1% of respondents see a ratio of restructured loans above 5% of their loan portfolio and up to 10% for smaller banks, while over 23% of respondents see a more conservative ratio of restructured loans included between 1% and 2%.

“This reflects banks’ continued efforts to provide financial relief to their borrowers by modifying their loan repayment terms,” ​​the BSP said.

“Philippine banks also intend to maintain risk-based capital, leverage and liquidity ratios at levels above national and global standards to promote institutional stability,” he added.

Most banking executives said corporate and personal banking would remain their top priorities, followed by payment and settlement services, cross-selling and treasury operations.

Banks also said they expect wholesale and retail trade and consumer lending to recover over the next 12 months, while agricultural lending will take about two years to fully recover.

“Banks revealed that digitizing products and services will be a priority over the next two years as banks recognize the need to integrate technology in achieving their business goals,” the BSP said.

According to the BSOS, banks are now looking to develop new capabilities, leverage customer relationships to sustain growth, and expand their reach to market digitally or via the offnew products or services in the new arrangement.

The survey results also showed that there was an increased organizational awareness among banks about sustainability. Ifnancing following the publication by the BSP of guidelines related to the environment, social and governance (ESG).

“The majority of respondents indicated that they planned to Iffund sustainable projects over the next two years,” the BSP said.

MAIN RISKS

Meanwhile, banks have said the main risks to their operations are asset quality and credit risk.

Respondents are also wary of macroeconomic and operational risks, according to the survey results.

To protect their respective banks against internal and external shocks, the lenders said they are improving risk management systems, strengthening customer relationships and improving staff capacity, the BSP said.

“Looking forward, the soundness and positive outlook of the banking system is complemented by the prudential and strategic reforms undertaken by the BSP over the years, as well as its rapid, time-limited and targeted relief measures, including many remain in place,” the central bank said.

“BSP will also adopt prudential standards that will strengthen corporate and risk governance, promote responsible innovation and sustainable development. Iffinance and maintain Ifnancial integrity and operational resilience in its Iffinancial institutions. All of these elements aim to foster a resilient, dynamic and inclusive environment. Iffinancial system that supports sustainable economic growth,” he added. — KB Ta-asan