Banking sector outlook ‘improving’ on recovery prospects and loan growth


THE OUTLOOK for the country’s banking sector this year is improving, supported by the trend of economic recovery and loan growth seen in Asia-PacificIfc emerging markets, according to Fitch Ratings.

In its Global Financial Institutions Sector Trends sent to reporters on Wednesday, Fitch said Asia-Pacific markets, including the Philippines, Hong Kong, Indonesia, Mongolia and Thailand, have an “improving” outlook. ” in 2022.

For emerging markets in the region, Fitch said banks’ financial performance will improve this year “on the back of economic and lending growth despite an uneven path to full recovery.”

Fitch said in October that it expects the Philippines economy to grow 6.8% in 2022, slightly above its projection of 6.6% given in July but still below the 7-to-7 target. 9% from the government.

Meanwhile, bank lending improved in the final months of last year after recording annual declines from December 2020 to July 2021. The latest data from Bangko Sentral ng Pilipinas (BSP) showed that outstanding Loans from major banks rose 4% year on year in November, marking the fourth consecutive month of annual growth.

On the other hand, Fitch said bad loans could rise as support measures are phased out, although the debt watcher said most markets have adequate provisioning.

BSP officials expect the industry-wide non-performing loan ratio to peak at 8.2% this year. The latest data showed the bad debt ratio stood at an eight-month low of 4.35% in November.

The Credit Watcher also warned that Ifnancial institutions in emerging Asia-PacificIfc the economies could face risks related to the tightening of monetary policy in the United States and uncertainties related to the ongoing pandemic.

The US Federal Reserve announced earlier that it would accelerate the pace of its gradual reduction in asset purchases. Officials also said they expect up to three rate hikes this year as they try to combat rising interest rates.flation.

At home, BSP Governor Benjamin E. Diokno said they would only start raising rates “when the outlook for the economy has improved significantly.” He said in an interview with Bloomberg on Tuesday that they don’t expect a rate hike in the Iffirst half of 2022.

In July 2021, Fitch revised its rating outlook on six Philippine banks from “negative” to reflect the same downward revision of the outlook for the country’s “BBB” rating. This means that a rating downgrade in the next 12 to 18 months could be possible. – Luz Wendy T. Noble


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