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Fitch Ratings Inc. said Philippine banks are unlikely to maintain a
high lending growth as they are bogged down by a challenging
operating environment and lack of sustainable earning assets of
banks.
In a special report on the Philippine banking
system, Fitch noted that demand for bank credit, which is equivalent
to 33 percent of gross domestic product, has been weak in the last
two years as the expansion of the economy is driven by services and
agriculture, which require less bank credit.
“Even though banks have recorded higher
lending growth over the last two years, the agency believes this
momentum may not be sustainable due to the more challenging
operating environment in the future,” Fitch said.
Based on central bank’s latest report,
outstanding loans of commercial banks, including reverse repurchase
agreements, or RRPs, rose further in March, posting a growth of 10.6
percent year-on-year.
Philippine banks are expected post double-digit
lending growth this year driven by lower bad assets and increased
demand for consumer and infrastructure development.
Nestor Espenilla Jr., Bangko Sentral ng
Pilipinas deputy governor, earlier said credit growth could reach 10
percent and non-performing loans ratio could decline further below 4
percent by the end of the year.
Fitch said the banking system is also dependent
on trading income in terms of allocation of investments.
About 25 percent of the banking system assets
are allocated mostly for government debt securities.
“Dependence in the present rising interest
rate environment could erode the banks’ earnings through lower
trading gains and possibly even actual or mark to market losses,”
Fitch said.
-- Maricel E. Burgonio
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