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.

Leave a Reply

Your email address will not be published. Required fields are marked *







Join The Exclusive Underground Investor Premium Member Status! Your Trade Ideas Are On The Next Page...


 
 



 

By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected. Remember that you can opt-out any time, we hate spam too!