Philippine banks to maintain their growth trajectory – S&P

MANILA - Banks in the Philippines are set to continue to grow rapidly over the next two years, thanks to strong solid economic growth, corporate profitability, low interest rates, and a drop in nonperforming loans, according to S&P Global Ratings. The report estimates that the banking sector in Philippines will grow at
15%-17% in 2017 and 2018, after 16.5% expansion in 2016.

"We believe that the credit cycle in the Philippines has further to run," said S&P Global Ratings' credit analyst, Ivan Tan.
 "Most of the factors that drive credit cycles - corporate profits, low interest rates, and abundant liquidity - still look very much in place."
 S&P believes that the Philippines' consumer loans segment has considerable potential for growth. However, high branching costs to reach customers in this large archipelago are a hindrance.
 “Banks are also justifiably cautious, given the lack of comprehensive consumer data and the high reported consumer NPLs,” S&P says.
 While growth has been robust for banks in the Philippines, returns have been low, the report notes.
 S&P attributes the weakness in profitability to banks' high exposure to low-yielding corporate loans and their poor cost efficiency. The profitability of Philippine banks was also dented by a decline in trading income as interest rates recovered, it says. www.standardandpoors.com (ATI).