By Melissa Luz T. Lopez
EXECUTIVES of Philippine banks expect the industry to remain stable over the next two years, with most lenders saying they will use financial technology (fintech) to capture more clients and improve services.
Results of the maiden Banking Sector Outlook Survey (BSOS) of the Bangko Sentral ng Pilipinas (BSP) — which seeks to ascertain the sentiments of the presidents, chief executive officers or country managers of 114 banks in the country — showed that 71% of respondents said they will use technology-enabled solutions for their business activities, as they look to broaden their client base and sustain business growth.
“[T]he respondents reveal that the top three strategic priorities of the bank executives surveyed are to grow the bank, optimize available technology and protect the bank,” the BSP said in the report published on Wednesday, noting that 81 of 114 top bank officials in the country who took part in the survey said they plan to harness technology to pursue business strategies.
In particular, increased digital operations and customer service via fintech are expected to bring “strategic efficiency” in the next two years, while improving customer experience and gaining new customers.
“Most of the respondents believe that growing their banks and optimizing the use of technology are strategic priorities to succeed in the business,” the central bank added.
Rolled out in June, the BSOS is a new surveillance tool designed to enable the central bank to get the pulse of bank executives about their outlook on business prospects and on the broader Philippine economy.
These results covered last semester.
In particular, 83.3% of the respondents said they will continue to focus on corporate and retail lending.
More than half of domestic universal and commercial banks, as well as most thrift lenders, said consumer loans are now their primary focus for granting credit, according to the survey results.
Bulk of foreign lenders who took part in the survey said they prefer to lend to manufacturers, while the smaller rural and cooperative banks continue to cater to farmers and retail clients.
Of the bank executives who took part in the poll, 66.7% said they see the industry remaining stable in the next two years, while one-third expect the sector to grow “even stronger.”
“The stable outlook for the banking system can be attributed to the strong macroeconomic fundamentals, adequate liquidity, rising capital buffers and profitability of banks,” the central bank said.
Most bank chiefs expect the local banking system to benefit from overall economic growth, which they expect to clock in at 5-7% until 2019. This compares to the 7-8% growth goal of the Duterte administration and the downward-revised estimates of 6.5% of the International Monetary Fund and 6.4% of the Asian Development Bank.
The top bank officials were particularly bullish about asset expansion, projecting 10-20% growth in loans, deposits and net income until 2019.
More than a third of survey respondents said they will hold more than enough cash to service their day-to-day operations, while their capital base will remain above the BSP’s 10% standard.
The survey also listed areas in which, according to respondents, banks have been encountering difficulty in complying with rules imposed by the central bank or by law.
It showed 78.1% of respondents saying it was difficult to meet lending quotas for small businesses as well as for agriculture and agrarian reform, amid reluctance to lend to these so-called “high-risk” segments.
More than a third of respondents cited anti-money laundering rules and new reporting rules as a “challenge.”
For its part, the BSP said “increasing sophistication of financial products” warrant strengthened surveillance among industry players.