PH banking sector seen to grow by double-digits Featured

PH banking sector seen to grow by double-digits Image: Quartz

MANILA -- Philippine banks are expected to grow "rapidly" in the next two years on the back of "strong" macroeconomic fundamentals, Standard and Poor's Global Ratings (S&P) said in a new report.

The banking sector will grow by 15 to 17 percent this year and the next, according to the "Philippine Banks To Continue To Ride Robust Economic Growth" published on Wednesday, Aug. 23.

"We believe that the credit cycle in the Philippines has further to run," S&P Credit Analyst Ivan Tan said in the report.

"Most of the factors that drive credit cycles – corporate profits, low interest rates, and abundant liquidity – still look very much in place," he added.

In a policy meeting earlier this month, the Bangko Sentral ng Pilipinas (BSP) decided to retain the overnight lending rate at 3.5 percent, the overnight borrowing rate at 3.0 percent, and the overnight deposit rate at 2.5 percent.

Domestic liquidity grew by 13.2 percent year-on-year to P9.9 trillion in June, recent data from the central bank showed.

S&P noted, however, that among the downside risks to growth are the high costs to achieving financial inclusion.

"S&P Global Ratings believe Philippines' consumer loans segment has considerable potential for growth. However, the high branching costs to reach customers in this large archipelago is a hindrance," it said.

BSP Governor Nestor A. Espenilla Jr. earlier said his focus would be on financial inclusion.

S&P retained its "stable" outlook on the Philippine banking industry.

"The outlook for banks in the Philippines is stable over the next 12 months, reflecting supportive economic conditions and sound financial fundamentals," it said.

"We believe the combination of sound capital and funding profiles is an enduring strength of the Philippine banking system and will continue to underpin ratings on the country's banks in 2017," said Tan. — GMA News

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