Remains upbeat for 2016 amid tougher competition, regulatory challenges
THE Philippines’ second-largest bank is maintaining its bullish outlook for the economy and its own lending and deposit business in 2016, but sees tougher conditions ahead for the nation’s banking sector due to looming competition from foreign banks entering the local market and tighter capital adequacy regulations beginning next year.
At a press briefing, Metrobank Research Department head Mark Bautista said the bank has maintained its 6.3 percent gross domestic product (GDP) growth outlook for the Philippine economy for 2016.
Bautista explained that government spending growth will likely be sustained at least through the first half as the outgoing Aquino government frontloads its budget expenditures, while still-soft commodity prices and low interest rates will continue to support solid private consumption spending.
Election-related spending is also expected to support key services such as transportation, communication and storage business activities as well as retail trade, he added.
A slight pickup in manufacturing is also seen as exports of electronics slightly improve, while the agricultural sector will remain weak as the effects of El Niño persist through the first half.
With the anticipated level of growth in 2016, Metrobank’s forecast is for a 12 percent to 15 percent growth in loans and deposits this year.
“For Metrobank, we continue to premise our targets on the assumption that GDP will grow at least 6 percent, and that translates to a loan growth of about 12 percent to 15 percent,” Jette Gamboa, head of Metrobank’s Strategic Planning Division, said.
Gamboa explained that bank loans historically grow at two to two-and-a-half times the country’s GDP growth rate.
Gamboa said Metrobank’s priority growth areas will continue to be the middle market, small and medium enterprises, and the consumer sector, as these serve as the engines of growth for industry.
“As far as deposits are concerned, we all know there’s ample liquidity in the system. I think deposit growth will remain healthy,” she added.
Despite the upbeat outlook, Gamboa pointed out that Metrobank recognizes a number of challenges for the entire banking industry going forward.
“One of the challenges we see is the intermediation of the sector. We believe that some of the large corporates are signaling intentions to issue fixed-income securities, because they also want to take advantage of the low interest-rate environment,” she said.
Another challenge is the entry of foreign banks, she said.
“So far, we know there are six new entrants and from what we hear, there are also a couple of other banks that have expressed intentions to open shop here in the Philippines,” she said.
On the regulatory front, Gamboa said the required higher capital buffer for D-SIBs, or the domestic systemically important banks, also poses ra challenge.
“There is an additional 2.5 percent capital conservation buffer which the BSP [Bangko Sentral ng Pilipinas] will implement starting 2017 and all the way to 2019. That would definitely also be a challenge for the sector to be more prudent in the use of capital,” she said.