Moody’s maintains ‘stable’ outlook for PH banking system
Metro Manila (CNN Philippines, April 11) — Moody’s Investors Service maintained its “stable” outlook for the Philippine banking system amid ongoing economic recovery and expected improvement in bank profitability.
“An easing of coronavirus-related restrictions in the country will stabilize the operating environment for banks and slow the growth of problem loans,” the international debt watchdog said in a report on Monday, also citing improving business sentiment. and consumers.
Most banks rated by Moody’s in the Philippines were given a stable outlook, with only the National Bank of the Philippines and Unionbank of the Philippines earning negative outlooks.
Moody’s also said banking institutions will be more profitable this year, with loan loss provisions expected to decline as asset quality stabilizes. Nonetheless, they could remain above pre-COVID levels as banks continue to build provisions for lingering asset risks.
“Bank capital ratios will decline slightly to approach pre-pandemic levels as loan growth resumes, but they will remain elevated, well above regulatory requirements,” the credit assessor added. American.
He also said banks’ deposit bases should be stable.
“Loan-to-deposit ratios will reach pre-pandemic levels as loan growth picks up alongside the economic recovery and deposit growth slows amid tighter liquidity in the system. However, banks will still have enough deposits to cover loan growth,” the company explained.
Moody’s latest outlook, however, points to risks. For example, he expects ratios of non-performing, restructured and overdue debt to remain higher than before the pandemic.
“The default risks of medium and large non-diversified companies operating in sectors severely affected by the pandemic, such as hospitality and retail, remain high, although the easing of restrictions has alleviated their stress to some extent. extent,” he explained.
The rating agency also flagged rising inflation amid the Ukraine-Russia conflict, a possible resurgence of COVID-19 infections due to new variants, and a potential interest rate hike could “curb but not derail” the economic recovery.
Moody’s expects economic output to grow 7% this year and 6.2% next year, both within the government’s 7-9% and 6-7% growth target ranges for 2022 and 2023.