BMI Research sees steady 17% loan growth this year

MANILA, Philippines -  BMI Research said credit growth in the Philippines would remain supportive of the robust economic growth outlook over the coming years.

The research arm of the Fitch Group said bank lending in the country would grow 17 percent this year and by an average of 13.6 percent until 2021.

“Asset and loan growth in the Philippine commercial banking sector are likely to remain strong over the coming years, supported by the country’s robust economic growth outlook, healthy capitalization and liquidity profiles, and the likelihood of further sector consolidation,” BMI Research said.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed loans extended by banks grew 18.7 percent to P6.32 trillion in May from P5.32 trillion in the same month.

Strong demand for funds to bankroll the expansion program of corporate and individual borrowers continued to boost bank lending in the first five months.

Statistics showed lending for production activities rose 17.6 percent to P5.59 trillion in end-May from P4.76 trillion in end-May last year. This accounted for 89.4 percent of the loans disbursed by Philippine banks.

In terms of assets, BMI Research said the country’s banking sector booked an average growth of 13.2 percent, the fastest expansion since the fourth quarter of 2014.

“The acceleration in asset growth was mainly driven by the loan segment, supported by a strong economic growth and improvement in risk appetite,” it said.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) have retained the GDP growth target at 6.5 to 7.5 percent this year from 6.9 percent last year despite the slowdown in the first quarter.

The Philippines booked a GDP expansion of 6.4 percent in the first quarter, slower than the 6.6 percent growth registered in the fourth quarter of last year, due to weak private consumption.

“Over the coming years, we maintain a fairly constructive view on the commercial banking sector given the country’s robust economic growth outlook, banks’ healthy capitalization and liquidity profiles, and likelihood of further sector consolidation,” BMI Research said.

The research unit said the country’s GDP growth would slow down over the next two years due to unfavorable base effects from the election spending in 2016.

“We maintain a fairly constructive view on the country’s growth prospects over the medium term. We forecast real GDP growth in the Philippines to come in at a robust pace of 6.3 percent in 2017 and 6.1 percent in 2018, driven by an increase in private and public sector investment, as well as deepening economic cooperation and engagement with China and Japan which will help to boost trade,” it said.