WebClick Tracer

July 14, 2024

Fitch affirms negative outlook for 5 Philippine banks

Fitch Ratings affirmed its negative outlook for five Philippine banks despite the improvement in the outlook on the operating environment for the country’s banking system.

The international credit rating agency retained the negative outlook for BDO Unibank led by bankero Nestor Tan, Bank of the Philippine Islands (BPI) headed by bankero TG Limcaoco as well as Metropolitan Bank & Trust Co. (Metrobank) led by bankero Fabian Dee.

Likewise, Fitch also maintained the negative outlook of government financial institutions including Land Bank of the Philippines led by bankero Cecilia Borromeo and Development Bank of the Philippines (DBP) headed by bankero Emmanuel Herbosa.

However, the debt watcher revised the outlook on the banking system operating environment score to stable from negative on receding COVID-19 pandemic-related risks and the continued economic recovery.

The Philippines’ GDP expanded by 8.3 percent in the first quarter, following a

rise of 5.7 percent in 2021.

Fitch expects the recovery momentum to be sustained, with growth of six percent in 2022 and 6.2 percent in 2023.

“The rebound in the economy should support loan demand and temper asset-quality risks that may arise from sectors still reeling from the pandemic,” it said.

The credit rating agency expects loan growth to continue to accelerate and settle at a high single-digit level by end 2022.

Improving business confidence has translated into a pick-up in loan demand, with system credit growth reaching 5.9 percent in March 2022, the fastest since May 2020.

Fitch also cited that employment conditions continued to improve as jobless rate fell to 5.8 percent in March from a peak of 17.6 percent in April 2022 and is now close to the pre-pandemic level of 5.3 percent.

“We do not think the average bank customer has been greatly affected by the economic slowdown, as they tend to have higher and more predictable income,” Fitch said.