By Keisha B. Ta-asan, Reporter

THREE Philippine banks expect their income and loans to continue growing this year, but slowing consumer demand amid record-high interest rates and inflation may affect their operations.

Bank of the Philippine Islands (BPI) President and Chief Executive Officer Jose Teodoro K. Limcaoco said he expects BPI to grow further this year as it targets to expand its customer base.

“This year, we should see an improvement on these numbers and our growth will come from new customers, better products, and better customer service,” Mr. Limcaoco told reporters during the launch of the bank’s partnership with Lazada last week.

He added that the bank aims to increase the number of their account holders by partnering with existing business clients that will serve as agents to onboard more Filipinos into the financial system. 

BPI was the country’s third-largest bank in asset terms at end-September 2022 with P2.52 trillion.

It booked a net income of P39.6 billion in 2022, up 66% from a year prior, driven by strong loan growth, higher net interest margins and lower provisions.

Meanwhile, China Banking Corp. (China Bank) sees sustained asset and profitability growth and is looking to focus on its core businesses, cross-selling, cost management, and maximizing their distribution network while expanding their digital services, its Chief Finance Officer Patrick D. Cheng said.

“We expect to maintain a low-teens loan growth, both in consumer and corporate segments. We remain committed to grow our high-yielding consumer loan portfolio which will help rebalance our loan portfolio, while balancing asset quality concerns on this segment,” Mr. Cheng said.

He said China Bank will prioritize improving its consumer loan portfolio while balancing asset quality concerns this year.

On the funding side, the bank will focus on low-cost deposits to manage rising costs and “will work closely with the conglomerates and emerging conglomerates in terms of capital market transactions or allow them to access our balance sheet, as needed.”

The bank will also continue to boost its digital capabilities, Mr. Cheng said.

“We believe that digital payments will sustain its growth momentum over the medium-term because digital channels remain as the convenient and efficient banking alternatives for clients, as seen during the pandemic,” he said. 

“Our data show sustained growth in the number of active users and the volume of transactions via our digital channels. The share of digital and e-channel transactions also increased, reflecting a shift in customer behavior,” he added.

“We are also keen on supporting the financing needs of companies with growth potential like in the sectors of logistics and renewable energy,” he added.

China Bank posted P1.22 trillion in assets at end-September 2022, making it the fifth-largest lender in the country.

Its net income increased by 17% year on year to P4.6 billion in the third quarter of 2022, driven by higher revenues and core fee earnings.

For its part, Security Bank Corp. expects its retail loans to continue expanding this year.

“Our expectation for 2023 is that the growth in our retail loan portfolio will accelerate. This is after our retail loans accelerated to 12% year-on-year growth in the first nine months of 2022 from 6% earlier in the first six months, with the growth mainly coming from home loans and credit cards,” Security Bank said in an e-mail. 

“Our corporate clients have been a key driver of loan growth in the first nine months of 2022. While we expect continued growth in 2023, it will be a bit more tempered given the higher base and market competition. We likewise hope to accelerate growth for the commercial clients,” it said.

For this year, Security Bank said it will continue to increase its resources to boost its retail, commercial and corporate loan portfolios, as well as its deposit, foreign exchange, capital markets and investment solutions.

“In support of our vision to become the most customer-centric bank in the Philippines, we continue to invest in five priority areas to enhance customer experience. These include: our employees, our data and digital infrastructure, cybersecurity, our core technology infrastructure, and continued process excellence and automation,” it said.

The lender added that it will continue to invest in digitalization and accelerate the growth of its branch network.

Security Bank booked an attributable net income of P2.31 billion in the third quarter of 2022, up by 35% year on year, on the back of improved performance of its core businesses. This brought its profit for the first nine months to P8.56 billion, 77.2% higher from the same period the year prior.

The lender was the 10th largest lender in asset terms as of September 2022 with P838.799 billion.

Security Bank said the Philippine banking sector will see continued volatility this year.

“This year will be characterized by volatility, with macroeconomic and geopolitical issues remaining a concern,” it said.

“Inflation will need to be controlled; otherwise, we may continue to see higher interest rates and leverage. Higher interest rates imply higher debt service cost. And with higher debt service cost, we may see borrowers default,” it added.

China Bank’s Mr. Cheng said the Bangko Sentral ng Pilipinas’ (BSP) continued tightening amid elevated inflation could cause the banking sector’s credit growth to slow.

“The rise in rates could, in turn, pressure our margins, particularly funding costs. Hopefully, oil and supply-side shocks do not return, as this will further put pressure on cost side inflation,” he said.

“Persistent high inflation will further squeeze incomes and savings of ordinary Filipinos and impact consumer spending, such as shifting from non-essential spending to essentials, looking for cheaper/non-branded products, deferring vacations, and borrowing activities such as auto and housing loans,” Mr. Cheng said.

Firms could also delay their expansion plans, and higher production costs could also squeeze their profits, he added.

Headline inflation accelerated to a new 14-year high of 8.7% in January as food prices continued to surge, fueling bets of further hikes in interest rates to anchor expectations.

The country’s consumer price index (CPI) was faster than the 8.1% print in December 2022 and 3% in the same month last year, and was the quickest since the 9.1% logged in November 2008.

This was also higher than the 7.6% median estimate in a BusinessWorld poll conducted last week and the 7.5% to 8.3% forecast range given by the central bank for the month, and marked the 10th consecutive month that inflation was above the BSP’s 2-4% target for the year.

The central bank sees headline inflation averaging 4.5% this year, lower than the 5.8% recorded in 2022.   

BSP Governor Felipe M. Medalla last week said the central bank will focus on managing inflation expectations in its policy review on Feb. 16, even as the US Federal Reserve delivered a smaller rate hike at its own meeting.

He previously said the BSP could hike borrowing costs by 25 or 50 basis points (bps) at this month’s policy meeting.

The Monetary Board last year raised interest rates by 350 bps, bringing its key rate to 5.5%, to tame inflation.

Meanwhile, the US central bank hiked its fed funds rate by 25 bps last week to a range between 4.5% and 4.75%, bringing total increases since March 2022 to 450 bps.