Philippine banks remain firm, but headwinds loom: Fitch

Weak local consumption and high credit impairment are fanning the fire.

Philippine banks are still displaying stability owing to “extraordinary” sovereign support, but the steep economic downturn is putting their standalone credit profiles under threat, according to a Fitch Ratings report.

The Philippine economy is getting battered by the crisis, with GDP shrinking 9% in H1 and by further 8% for the full-year. The economy might rebound to 9% next year, but this reflects in part a low base case, analysts said.

Abysmal local consumption and elevating credit impairment are making things worse, with revenue tailwinds brought about by monetary easing likely to subside by H2 and more asset decay after the debt moratorium lapses.

Credit costs will likely remain high in 2021, therefore exerting more pressure on earnings and profitability. Earnings will tumblr as credit provisions spike, but the major banks have front-loaded such allowances in 2020, the report noted.

“The ratings and outlooks on the five banks will continue to be sensitive to changes in their asset quality and appetite for risk amid the more challenging outlook. They will also be influenced by any changes in the sovereign rating and outlook on the Philippines, as the IDRs of four of them are support-driven,” Fitch said.

Join Asian Banking & Finance community
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!

Banks should have enough buffers and find climate transition risks manageable.
The products are now available at Eccellente by HAO Market in Singapore.
Institutional clients may accelerate time-to-market financial applications.
This was thanks to a rise in loans made to the service sector during the period.
Discussions between the two banks are at the preliminary stage.
But it reported weaker quarterly performance, largely due to its $309.8m Q3 expense.
Uncertainty over Omicron's impact may drive this slowdown.
Only 2 in 10 Singapore micro-multinationals think banks offer value for money.
The Internet boom has pushed 9 out of 10 digital merchants to accept digital payments.
It’s not as urgent as other markets with credit under-penetration, says TMRW Digital Group CCO.
The move is part of the BSP’s Digital Payments Transformation Roadmap.
Internet economy in SEA has propelled digital payments further.
The market is expected to top $83.2b in four years’ time.
The 3.26% interest rate average is its highest since November 2018.