Connect with us

Hi, what are you looking for?

Economy

PHL banks continue to face credit risks — S&P

By Luz Wendy T. Noble, Reporter

EMERGING MARKETS such as the Philippines will continue to face credit risks this year, as the central bank is likely to lift regulatory relief measures and the loan payment moratorium expires,  S&P Global Ratings said.

At the same time, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said they are still looking into asset quality developments to gauge when to lift relief measures implemented at the height of the lockdown last year.

“NPLs (nonperforming loans) and restructured loans will continue to increase over the next few quarters as the true impact of the COVID-19 (coronavirus disease 2019) shock on the banks’ borrowers unfolds,” Nikita Anand, an analyst at S&P Global Ratings, said in an e-mail.

“We believe NPL ratio could further climb to about 6%-6.5% by the end of 2021,” she added. The global debt watcher projects the ratio may have risen by 4-5% in 2020 from the 2019 level.

Ms. Anand warned a “sharp rise” in NPL may occur after the second debt moratorium as provided for under Republic Act 11494 or the Bayanihan to Recover as One Act expired on Dec. 31, 2020. 

The Philippine banking industry’s NPL ratio reached 3.81% as of end-November, rising from the 3.72% in October as well as the 2.19% a year earlier, based on BSP data. Bad loans surged 73.6% to P404.687 billion in November from P233.064 billion a year ago.

The restructured loans ratio also increased to 1.31% of total loans as of end-November from 0.38% a year earlier. These loans soared 241% to P139.614 billion from P40.857 billion a year ago.

S&P in a note warned that bad loans will further pick up once regulatory relief measures employed by central banks in developing markets are lifted.

Ms. Fonacier said they “are still monitoring developments on asset quality.”

“Hence, we cannot yet determine the timeline on the lifting of the regulatory relief at this point,” she said in a Viber message.

BSP Governor Benjamin E. Diokno said they will carefully assess the timing of when they will unwind relief measures to ensure it will not cause risks or instability to the financial system.

The central bank said the bad loan ratio may have reached 4.6% as of end-2020. It peaked at 17.6% in 2002 in the aftermath of the Asian financial crisis.

Meanwhile, Ms. Anand said the rollout of COVID-19 vaccines will be used in assessing economic and credit risks of sovereigns.

“Widespread immunization, which certain countries might achieve by midyear, will help pave the way for a return to more normal levels of social and economic activity,” she said. “The improvement in asset quality will depend on economic recovery and stabilization of credit conditions.”

The BSP’s Ms. Fonacier said the country’s vaccination program is a welcome development, noting its “positive impact on business confidence.”

The Banking Sector Outlook Survey of the BSP released earlier this month showed majority of respondent banks expect the NPL ratio to go beyond 3% until 2022, while nearly half of banks see restructured loans to comprise 3-5% of their credit portfolio.

This uncertainty has led to a decline in bank lending growth, which stood at 0.3% in November, the slowest since the 1.9% in September 2006.

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!

Latest

Investing

Almost one in five UK workers say they are likely to change jobs in the next 12 months as they seek better pay and...

Investing

Around 57 per cent of van owners feel discouraged from going electric due to a lack of charging points, according to a survey published...

Investing

Business and cycling groups have urged the government to reform its cycle to work scheme so it can be used by lower-paid and self-employed...

Investing

Beer drinkers could soon find it difficult to buy their favourite bottled beverage because of a shortage of glassware triggered by soaring energy costs,...

Economy

  Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their...

Economy

Notice of Annual Stockholders’ Meeting Notice is hereby given that the Annual Stockholders Meeting will be held on Monday, June 20, 2022 at 8:30...

You May Also Like

Investing

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

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

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

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Disclaimer: SmartRetirementReport.com, 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.