, Philippines

Philippine banks' bad loans to rise in Q1 2021 as support fades: S&P

They will lean on buffers built, but this won’t provide any shield if the pandemic worsens again.

Nonperforming loans (NPLs) at Philippine banks will see a rise in the first quarter of 2021 as loan moratoriums and fiscal support are phased out, says S&P Global Ratings in their latest report. It is expected to peak at the second half of the year should economic recovery stay on track.

"Philippine banks are on a long road to recovery," said S&P Global Ratings credit analyst Nikita Anand. "Asset quality will deteriorate further in the coming quarters as banks recognize the full brunt of COVID-19 on borrowers."

The industry's NPL ratio is sighted to increase to 6% in 2021 from 3.6% at end-2020. Consumer and small business loans will continue to see high new NPL formation, adds S&P.

The banks’ high provisioning in 2020 and their capital buffers will help maintain credit standing as they repair financial metrics—assuming the economic revival stays on track.

However, should the pandemic situation worsen once more, things will likely turn for the worse for banks. Lenders’ buffers won’t be able to hold back negative effects, warns S&P.

For 2021, Philippine banks’ credit costs—a measure of provisioning for bad loans—are sighted to stay raised at between 1.5% up to 1.8%.

On the upside, S&P expects sector-wide profits to improve slightly in 2021, with return on assets increasing to 1% on the back of relatively better growth and lower credit costs in 2021.

Vaccination will be key to sustain the economy’s revival. Relaxation of restrictions in Manila will support stronger activity in the second half.

Overall, the country’s GDP is estimated to soar by 9.6% in 2021. However, this is off a low base, given last year's sharp contraction. Furthermore, the country’s output gap won't likely close over the next three years.

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Get Asian Banking & Finance in your inbox

VCs flocking to "lucrative" APAC payments segment: report

Global VC deals rose to 620 in Q1 2021.

China injects $15.5b cash into the financial system to maintain liquidity: report

The nation’s top leaders recently described economic recovery as “unbalanced and unstable.”

Chart of the Week: Card payments in China to rebound 21.3% in 2021

Card payments are set to rise as economic activities gathers pace.

Citi APAC adds nearly 650 new wealth professionals in 2021 so far

The group has added over $5b in net new money in Q1 alone.

Goldman Sachs ramps up China ambitions with hiring spree: report

It is planning to add over 400 new people in its headcount in 2021 alone.

Citi appoints new head for private banking arm in South Asia

Lee will have direct responsibility over the private bank arm of Singapore, Malaysia.

Citi APAC rolls out gender diversity program for investment, securities arm

The program’s 50 top candidates will have the chance to be recruited by the bank.

Standard Chartered, EastWest on the blueprint for building the bank of the future

Data is the new oil, says Sarabjit Anand, Standard Chartered’s CIO for Singapore and ASEAN.

Low costs buoys Australian banks’ profits, but pressures to persist

Operating profit is 46% higher than last year, but pre-impairment earnings remain subdued.

HSG shares insights on modelling core banking IT for the digital economy

Sisi Yu gives us a glimpse of how banks can achieve higher performance through improved services.