Credit card interest rate adjustment to boost PH banks’ profitability — Fitch Ratings

Global credit watcher Fitch Ratings said Thursday that the Philippine central bank’s decision to adjust the interest rate cap on credit card transactions will boost local banks’ profitability.

In its commentary, Fitch Ratings said the decision of the Bangko Sentral ng Pilipinas (BSP) to raise the interest rate ceiling on credit cardholders' unpaid balances to 3% from 2% per month "will buoy banks' net interest margins."

"We estimate that the newly announced rate ceiling could add about P30 billion to P40 billion in interest income for the banking sector," the credit watcher said.

"This benefit may be partly offset by the rise in credit costs if banks relax their standards or expand their credit card portfolios more aggressively, though we do not expect any increase to be material, provided there is no new shock in the economy, which suggests that the sector's profitability could marginally surpass our base case," it added.

The 2% cap on credit card transactions’ monthly interest rate was implemented by the BSP in November 2020 to ease borrowers' debt burden during the COVID-19 pandemic. —VBL, GMA Integrated News