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Banking

Phl banks remain strongest in Asia, says Fitch research

US IMMIGRATION NOTES - Lawrence Agcaoili - The Philippine Star

MANILA, Philippines - The research arm of the Fitch Group said Philippine banks are expected to remain the strongest in the region on the back of robust macroeconomic fundamentals.

In its latest industry trend analysis titled “Risks Remain in China and India, Philippines Still Robust,” BMI Research said Philippine banks continued to stand out in the region.

“Within the region, we retain our long-held positive view on Philippine banks as underlying fundamentals remain robust,” BMI Research said.

The country’s gross domestic product (GDP) growth averaged 6.8 percent in 2016 despite slowing down to 6.6 percent in the fourth quarter from the revised seven percent in the third quarter.

This was well within the six to seven percent target set by economic managers of the Duterte administration.

“Philippine banks stand out in the region, and we maintain our constructive outlook as they are supported by a strong economic growth outlook, stable asset quality, and solid capitalization. Indeed, the archipelago is among the fastest growing economies in Asia,” it added.

BMI Research believes the strong pace of growth is likely to be sustained by the Duterte administration’s commitment to boost infrastructure spending coupled with strong foreign investor interest, and a booming services sector.

For 2017, economic managers penned a GDP growth target of between 6.5 and 7.5 percent.

The research arm said the robust economic expansion would support the strong loan growth in the country.

“This should therefore help to support strong loan growth in the Philippines, which came in at 18.9 percent year-on-year in November 2016,” BMI Research added.

It projects loan growth in the Philippines easing to 15 percent this year from the projected 18 percent last year.

In addition, it said fundamentals of the sector remain strong with the gross non-performing loan (NPL) ratio registering at a low rate of two percent in November and the capital adequacy ratio (on a solo basis) printing at high rate of 15.6 percent in the third quarter of last year.

Earlier, Fitch Ratings noted the Philippines has taken the biggest steps toward the liberalization of its banking industry with the removal of the cap on foreign ownership of banks through Republic Act 10641 signed by former president Benigno Aquino III in July 2014.

This paved the way for the entry of nine foreign banks including the First Commercial Bank of Taiwan, Sumitomo Mitsui of Japan, Shinhan Bank of South Korea, Cathay United Bank of Taiwan, the Industrial Bank of Korea, Yuanta Bank of Taiwan, the United Overseas Bank Ltd. of Singapore, Seoul-based Woori Bank, and Hua Nan Commercial Bank Ltd. of Taiwan.

FITCH
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