The domestic banking space is confident about its prospects in the near term, with a majority expressing strong confidence for the next two years.
The Banking Sector Outlook Survey (BSOS) released on Thursday showed that 147 banks out of the 173 surveyed across banking groups said a majority of 70.1% project double-digit growth in their assets.
"Overall, respondent banks expect double-digit growth in their assets, loans, deposits, and net income, as well as plan to maintain robust capital and liquidity positions to maintain institutional stability," the Bangko Sentral ng Pilipinas (BSP) said.
Survey results showed that 64% of the respondent banks expect a stable banking system in the next two years, while 34.7% project a more robust one.
The BSOS gathers the sentiments and outlook of presidents, chief executive officers, and country managers of Philippine banks on the horizon.
As of December 2023, the total assets of these respondent banks accounted for 97.7% of the country's banking system's total assets.
The results also point to an improvement in banks' expectations of the quality of their loan portfolio. Fewer respondent banks (48.7% from 52.4% in the 2022 BSOS) anticipate a non-performing loan (NPL) ratio above 5% in the next two years.
"Across banking groups, most foreign banks and universal and commercial banks are optimistic, with the former anticipating a less than 1 percent NPL ratio while the latter foreseeing their NPL ratio to settle within the range of 1 to 5 percent," the BSP said.
Survey results showed that smaller banking groups are more pessimistic as most thrift, rural, cooperative, and digital banks expect their NPL ratio to be over 5%.
Regarding loan loss provisions, most respondent banks plan to maintain a high NPL coverage ratio, ensuring adequate coverage of potential losses in their loan portfolio.
The BSP said restructured loans are projected at 2% of total loans for most respondent banks.
In terms of priorities, the BSP said most respondent banks indicate that they will continue to focus on corporate and retail lending and provide financial support to sustainable and green projects, including key sectors such as micro, small, and medium enterprises, real estate, and households.
Over half of respondent banks also plan to invest in digital transformation to enhance their financial products and services.
Respondent banks, meanwhile, said credit, operational, and macroeconomic risks continued to be the primary concern of respondent banks; as such, they are actively enhancing their risk governance to safeguard the interests of their depositors and investors, as well as maintain the safety and soundness of their institutions.
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