Philippine loan relief helps banks avoid NPL spike despite profit hit

Credit losses remain elevated.

The recently rolled-out relief measures in the Philippines for borrowers affected by the Middle East War could weaken the profitability of its domestic banks, said S&P Global Ratings.

"The move may undermine bank profitability as net interest margins peak and credit losses remain elevated," said Nikita Anand, credit analyst at S&P Global Ratings.

On the other hand, it could avoid a spike in nonperforming loans, Anand said.

“The temporary suspension of loan repayments for a year after the state of emergency began should help borrowers better cope with cash flow problems,” Anand wrote.

The Bangko Sentral ng Pilipinas (BSP) temporarily suspended loan repayments for borrowers affected by higher energy prices and supply-chain disruptions.

Under Monetary Board Resolution No. 296, a temporary grace period of up to six months is given for loan repayments of affected borrowers.

Agricultural loan payments can be deferred for up to one year, subject to bank assessment.

The BSP also urged FIs to temporarily suspend fees and charges on online banking platforms and e-money services.