MANILA, Philippines — Top bankers are cautiously optimistic about the industry this year, but are convinced it would be a better year than 2018 with the continued slowdown in inflation due to easing oil and food prices.
BDO Unibank Inc. president and chief executive officer Nestor Tan said the country’s largest bank is facing 2019 with cautious optimism.
Tan said there is just so much change and so much volatility that it is very difficult to be in amid the volatile global and domestic financial markets including the trade war between the US and China as well as elevated inflation that paved the way to higher interest rates.
“We don’t know what 2019 will bring, but let me share with you some words of wisdom. With the 2018 we had, 2019 I don’t think could be much worse,” he said.
Alfonso Salcedo, president and chief executive officer of Security Bank Corp., echoed Tan’s statement that the industry is confident about the banking sector, but is ready to face possible difficulties despite the easing inflation.
“I’m cautiously optimistic about the banking industry in 2019. Inflation appears to be drifting back to the two to four percent target range. There is a possibility for no rate hikes this year,” Salcedo said.
Inflation climbed to 5.2 percent last year, exceeding the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP), from 2.9 percent in 2017 on the back of higher oil and food prices as well as the weak peso.
The rise in consumer prices eased to a seven-month low of 5.1 percent in December from six percent in November. Inflation peaked at a near-decade high of 6.7 percent in September and October.
The BSP’s Monetary Board lifted rates by 175 basis points in five rate-setting meetings between May and November to prevent inflation from spiraling out of control before taking a pause from its tightening cycle last December.
Salcedo said credit growth would most likely be in the mid teens with the ongoing massive infrastructure build up under the Build Build Build program as well as the continued reduction in the reserve requirement ratio that would allow banks to lend more.
2019 to be a better year
Ayala-led Bank of the Philippine Islands president and CEO Cezar Consing said 2019 would be a better year for the Philippine economy as well as the banking industry with the continued decline in global oil prices as well as the sustained slow down in inflation.
“I actually think that 2019 could be a better year for the economy because if you look at 2018, we were faced with high oil prices and high food prices and so that raised inflation which the central bank had to respond to by raising rates,” Consing said.
Consing added inflation would begin to taper off due to interventions done by the government to boost food supply.
Salcedo said 2019 looks rosier than 2018.
“Oil prices have dropped significantly. The midterm elections will also provide some stimulus to the economy/consumption. While there are still global headwinds like a China economic slowdown and the US-China trade war, 2019 promises to be a lot more stable than 2018. Predictability is good for business,” Salcedo added.
For his part, BDO’s Tan said 2019 would be a lighter year compared to 2018.
“So it is either one of two things, it gets better or we get used to it. So either way it is going to feel lighter. So let us keep that in mind and look at 2019 with optimism,” Tan said.