June 14, 2019
BANK executives remain bullish about the Philippine economy as they expect it to grow within the next two years in line with the government’s target, according to a poll conducted by the Bangko Sentral ng Pilipinas (BSP).
“Despite global uncertainties and market volatilities, banks maintain their optimism on the country’s economic prospects during the second semester of 2018, as 86.1 percent of…respondents project the domestic economy to grow between 6 percent and 7 percent within the next two years….” the BSP said on Thursday, citing the results of its Banking Sector Outlook Survey (BSOS) for July to December 2018.
For this year, the government revised downward its gross domestic product growth target to 6 to 7 percent. It aims for this growth to settle within the 6.5 to 7.5-percent range for 2020.
Lenders’ upbeat economic outlook also translated to their continued confidence in the Philippine banking system.
“More importantly, the outlook on the Philippine banking system remains stable for 70.2 percent of all respondents, with the rest mostly expecting a stronger banking system,” the central bank said.
The upgrade of the S&P Global Ratings Banking Industry Country Risk Assessment (Bicra) of the Philippines was said to have also contributed to the optimism.
In February, the international debt water revised downward its risk assessment on the country from group “6” to group “5,” based on its view that the institutional framework of the Philippine banking system had improved due to the amended BSP charter.
Moreover, the Bangko Sentral said this optimism led 73.8 percent of respondents to forecast double-digit growth in the banks’ assets, which “is expected to be driven by credit expansion, as 81.0 percent of the banks project a double-digit growth in their loan portfolio during the BSOS for the second semester of 2018.”
Deposits are also expected to fuel asset expansion, as 72.2 percent of respondents foresee this to grow by double digits.
“The banks’ bullish projections likewise elicited buoyant expectations on returns, as 92.4 percent of respondents for the second semester of 2018 forecast double-digit net income growth for the next two years, compared to 83.3 percent of respondents during the first semester that projected the same,” the BSP said.
This projected net income growth is expected to bring return on equity to between 5 percent and 10 percent by most respondents.
“To realize the expected bank growth, respondents set the following strategic priorities for their operations: to grow the bank; to optimize use of available technology; and to protect the bank,” the central bank said.
Last, the Bangko Sentral said the use of technology was expected to reshape the future landscape of the banking system, as 73.5 percent of banks had plans to use technology in their transactions in the near term.
The BSOS covers all universal/commercial and thrift banks, and the top 20 rural/cooperative banks in terms of total loan portfolio. The survey questionnaire contains 20 questions and transmitted to the presidents, chief executive officers and country managers of banks.
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