Connect with us

Hi, what are you looking for?


Moody’s sees sluggish loan growth on banks’ tighter credit standards

THE COMING YEAR will likely remain challenging for Philippine banks as they may face continued tepid loan growth and downside risks to profitability, an analyst from a debt watcher said.

“Loan growth will likely be muted in 2021 as the banks cautiously navigate the challenging economic environment,” Joyce Ong, an analyst at the Financial Institutions Group of Moody’s Investors Service, said in an e-mail.

Banks continued to impose tighter lending standards as of the third quarter to guard themselves against soured debt, a study from the Bangko Sentral ng Pilipinas (BSP) showed.

Despite record low interest rates amid aggressive policy easing, credit growth remained sluggish due to these stricter standards and with borrowers’ confidence remaining low amid the coronavirus pandemic. Outstanding loans by universal and commercial banks rose 2.4% in September, the slowest pace since the 2.4% recorded in June 2007.

Meanwhile, asset quality has also deteriorated. The banking industry’s nonperforming loan (NPL) ratio stood at a seven-year high of 3.4% at end-September, the highest since the 3.42% logged in May 2013. This, as bad loans surged 60% year on year to P364.672 billion from P227.504 billion.

Allowance for credit losses set aside by Philippine banks surged 60% to P334.57 billion as of September from P209.069 billion a year ago. In the coming year, Moody’s expects credit loss provisions in the Association of Southeast Asian Nations (ASEAN) to decline from the high levels seen this year.

“We expect credit costs to remain elevated as problem loans continue to increase in 2021 after the end of the second credit grace period,” Ms. Ong said.

Republic Act (RA) No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II) provides a one-time 60-day loan moratorium following the initial debt relief under Bayanihan I (RA 11469).

Ms. Ong added that banks will continue to face profitability pressures in the coming year.

“We do not expect to see a repeat of the significant trading gains recorded in 2020. Low interest rates will erode loan yields, but this will be somewhat offset by the corresponding decline in funding costs,” she said.

The Philippine banking industry’s net profit reached P123.431 billion in the first nine months of the year, declining by 28% from the P171.162 billion logged in the comparable year-ago period, BSP data showed. — L.W.T. Noble

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



More than half of all Londoners have either started their own business or aspire to do so in 2023, compared to nearly a third...


The John Lewis Partnership has struck a £500m deal with the investment firm Abrdn to build 1,000 residential rental homes, redeveloping three sites already...


The first four scale-up visa licences have been approved by the Home Office three months after the scheme began, prompting lawyers to question the...


Barclays has been fined £8.4 million by the payments industry watchdog for failing to be transparent with retailers about the fees they were being...


Ministers have called on Britain’s biggest rail union to be “altruistic” and suspend strike action over Christmas and new year amid warnings that it...


Filipino writers, poets, and playwrights play an important role in countering and correcting falsehoods running rampant in an extremely polarized public sphere, said Dr....

You May Also Like


The minute that any question pops into your head, you can simply ask Google. No longer do we have to pour over books and...


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


Browsing history makes referring to sites and pages you’ve visited in the past seamless. It’ll help you recall what page you checked out on...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.