Double-digit credit growth seen in 2 years

MANILA, Philippines — Philippine banks are expecting double-digit credit growth over the next two years on the back of higher loan demand amid improving business and consumer confidence as the country recovers from the pandemic-induced recession.

In the First Semester 2021 Banking Sector Outlook Survey (BSOS), the Bangko Sentral ng Pilipinas (BSP) said 72.7 percent of the respondents expect a double-digit growth in their loan book in the next two years.

The BSP said big and mid-sized banks are looking at a 10 to 15 percent credit growth in 2022 and 2023.

Likewise, about 57.9 percent of the foreign bank respondents are projecting a loan growth of more than 20 percent over the two-year period.

The BSP also said small or rural and cooperative banks are now expecting a faster credit growth of 15 to 20 percent instead of the previous forecast of 10 to 15 percent.

“The progress in the country’s vaccination rollout is expected to sustain loan growth due to consumer and business confidence and higher loan demand,” the BSP said.

Latest data from the BSP showed loans disbursed by universal and commercial banks contracted for the sixth straight month in May as credit activity remained muted amid the resurgence of COVID-19 infections.

The outstanding loans of big banks fell to P9.01 trillion in end- May from P9.39 trillion in the same period last year despite the a series of  rate cuts which brought the benchmark interest rate to an all-time low of two percent last year.

Fewer Philippine banks, or 65.6 percent of respondents, expect a 10 to 15 percent growth in deposits in the first half compared to 68.2 percent in the second semester of last year.

On the other hand, the BSP said more banks set upbeat expectations on returns as 74.4 percent of the respondents for the first semester forecasted a double-digit net income growth for the next two years, slightly higher compared to the 70.6 percent in the second semester of last year.

In particular, 42.9 percent of big banks, 47.4 percent of foreign banks and 40.7 percent of small banks viewed growth in net income to be higher than 30 percent for the next two years.

After plunging by about 33 percent last year due to higher provision for potential loan losses, the aggregate net income of Philippine banks slipped by three percent to P53.98 billion in the first quarter from P55.68 billion in the same quarter last year.

About 41.9 percent of the bank presidents covered by the survey believe the economy would bounce back with a growth of five to six percent, while 20.9 percent see a faster expansion of six to 6.3 percent this year.

BSP Governor Benjamin Diokno earlier said industry leaders continue to view the outlook of the banking system as stable with expectations of double-digit growth in assets, loans, investments, deposits and net income for the next two years.

“The upbeat expectations of the banking system based on the results of the BSOS for the first semester is testament to the industry’s confidence in the strong medium-term prospects of the economy,” Diokno said.