Retail banking income expected at P470B by 2020

Lawrence Agcaoili (The Philippine Star) - November 7, 2015 - 9:00am

MANILA, Philippines – Philippine banks could see their retail revenues surge by 127 percent over the next five years amid the continued rise in banked population and higher per capita income, a think tank said.

 In a survey by The Asian Banker released Friday, it was revealed that the gross income of retail banking in the country would hit P470 billion by 2020 from the projected P207 billion this year.

The industry is expected to grow at a steady pace with a compounded annual growth rate of 17.8 percent between 2015 and 2020 as the country’s banked population rises to 45 percent from 30 percent.

  Likewise, the country’s per capita income is seen to increase to $1,951 from $1,689.

 The think tank also cited further improvements for the national payments infrastructure.

The Asian Banker said growth in the retail banking industry in the Philippines would slow down between 18 percent and 19 percent this year after growing by 20 percent in 2014. Severe price competition and a tightening in mortgage lending were tagged as reasons.

 It added that future growth prospects for the retail financial services industry would focus on small and medium enterprises (SME) banking, mortgages and auto loans.

 “Despite a booming economy, the Philippines retail banking industry is at an inflection point as both internal and external pressures for bank consolidation mount, driven by a new wave of foreign players entering the market and the impact of Asean 2015 raises the stakes,” the Asian Banker said.

 To capture growth opportunities, banks are currently ramping up their sales capabilities and improving distribution networks.

 However, the think tank said banks need to address long-term issues, including scalability, technology transformation, financial inclusion, productivity and the need for new retail financial products.

 Earlier, Bangko Sentral ng Piipinas Governor Amando Tetangco Jr. stressed the need for Philippine banks to shape up amid intense competition from the entry of foreign banks into the country by virtue of Republic Act 10641 and the Asean integration.

The Asian Banker study took into consideration the outlook in gross income for retail financial services in Australia, Bangladesh, Brunei, Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Myanmar, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.

 The survey showed the income retail financial services of commercial banks in Asia Pacific would amount to $824 billion by 2020 from the projected level of $464 billion this year.

“The ability to generate gross income in any given market is regarded as a key indicator of wallet share and a determinant of a bank’s bench strength in retail financial services. For the first time Asian Banker Research has ascertained the income potential in retail financial service markets across the Asia Pacific, and identified the top players,” Asian Banker head of research Mobasher Zein Kazmi said.

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