Philippine banks are expected to benefit from healthy capital and asset quality as well as the optimism about the domestic economy this year, according to Standard and Poor's Ratings Services (S&P).
"The Philippines' robust economy will likely continue to drive expansion in domestic credit at about two to three times GDP (gross domestic product) growth," S&P analyst Ivan Tan said in a statement on Wednesday.
The statement accompanies the debt-watcher's report, "The Philippines' Supportive Economy Underpins A Stable Outlook for its Banking Sector in 2016."
Tan is forecasting that loan growth in the Philippines will reach 8 to 12 percent for 2015 and 2016, which "remains high by regional standards."
Despite the rosy picture from S&P, Philippine bankers noted they are focused on the challenges the industry is facing this year.
In a separate interview with GMA News Online, Security Bank Corporation President Alfonso Salcedo Jr. noted the downside risks are coming from the economic slack in China and the volatile oil prices.
"China's slowing economy and its geopolitical interest in the South China Sea are developments we should closely watch," he said.
On oil prices, Salcedo noted the Philippines has to be "vigilant" while evaluating how it can capitalize on the commodity's volatility.
In an earlier disclosure to the Philippine Stock Exchange, Rizal Commercial Banking Corp. (RCBC) President and CEO Lorenzo V. Tan noted that banks will continue to face a "more challenging regulatory interest rate and global economic environment in 2016."
S&P said it expects Philippines interest rates to go up this year.
"We also anticipate that domestic interest rates in the Philippines will trend upward, which may cause banks to book market-to-market loans on their significant holdings of fixed-rate government bonds," S&P said.
"This augurs well for businesses that will want to expand," Salcedo noted, saying consumer loans will continue to grow.
Reflection of the economy
United Coconut Planters Bank (UCPB) said the banking industry will tide over the challenges.
"The banking industry is a reflection of the economy which is doing well, thanks to the sound monetary policies and smooth operations of the Bangko Sentral ng Pilipinas and the strong revenues from the BPO (business process outsourcing) industry and inflow of remittances," UCPB President Jeronimo U. Kilayko said.
"I expect the Philippine banking industry to continue to do well even amidst the challenges of the global economic environment," he added.
Margins on interests are expected to be strong, given the increase in high-yielding consumer loans.
"We believe the combination of sound capital and funding profiles is an enduring strength of the Philippine banking system and will continue to underpin ratings in 2016," S&P's Tan said. – VS GMA News