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April 12, 2024

S&P Global: Growth and lending expected to bolster Philippine banks

S&P Global Ratings has expressed confidence in the stability of the Philippine banking sector for the year ahead.

Ivan Tan, director and Southeast Asia lead analyst at S&P Global Ratings, said this optimism stemmed from expectations of accelerated economic growth and increased lending activity.

Highlighting a positive trajectory, Tan projected a GDP growth rate of 6% for 2024, surpassing the previous year’s 5.6%. He noted the alignment of this growth trend with other emerging markets, suggesting promising economic prospects.

Anticipating conducive conditions for loan expansion, Tan predicted a potential surge in lending activity, fueled by anticipated reductions in benchmark interest rates by the Bangko Sentral ng Pilipinas (BSP). He anticipated a 75 basis points (bps) decrease in the BSP’s benchmark rates, with loan growth expected to range between 10-12% for the year, outpacing the 6% growth observed in 2023.

Tan underscored the significance of prevailing monetary policies, citing the Monetary Board’s prior decisions to raise benchmark interest rates by 450 bps between May 2022 and October 2023, reaching a peak of 6.5%, before stabilizing.

Despite concerns about elevated vacancy rates in commercial real estate, Tan emphasized the resilience of borrowers, particularly affluent, family-owned conglomerates, which helped maintain the nonperforming loan ratio at 3%, in line with the industry average.