THE BANKING INDUSTRY expects the economy to grow by 6-7% in the next two years, aligned with the government’s forecast, according to a survey by the Bangko Sentral ng Pilipinas (BSP).
A big chunk of the lenders that responded to the Banking Sector Outlook Survey (BSOS) for the first half are also positive that the industry will remain stable as most of them are optimistic of a double-digit growth in their assets, loans, deposits, as well as net income.
“Banks maintain their optimism on the country’s economic prospect amid global uncertainties and market volatilities during the first semester of 2019 as 83.5% of the BSOS respondents projected that the gross domestic product (GDP) shall grow between six to seven percent within the next two years,” according to the BSP report published on its website on Thursday.
Meanwhile, 73.5% of bank respondents expect double-digit growth in their assets. This is lower compared to the 80% of them that projected a double-digit growth in the first half of 2018.
Despite some banks becoming less positive in terms of a double-digit growth forecast, lenders are bullish on better return on equity (RoE). The survey found that only 13.8% expect an RoE of less than 5% compared to the 20.6% that expected the same in the same comparable period a year ago.
The survey results also showed that lenders are becoming more alarmed about their non-performing loan (NPL) ratios as 66.7% of respondents expect NPL to climb from only 54.4% in the first half of 2018.
“The sluggish global growth, coupled with trade tensions among the world’s biggest economies, may adversely impact the domestic manufacturing sector which exports a significant portion of its output. This, in turn, may have led to the banks’ forecast of an uptick in the NPL ratios,” the report said.
Aside from this, majority of banks also said corporate and retail banking continue to be their biggest priority. This is followed by payment services.
In terms of strategic priorities, lenders mentioned that their top two are to grow their bank and to optimize the available technology.
“In particular, most of the banks planning or already employing technology in their operations find its most important application in areas of data security and privacy, know your customer (KYC) procedures and loan scoring. Moreover, most of the respondent banks revealed preparedness in managing cybersecurity risks,” the report said.
The survey respondents include all universal banks and thrift banks, as well as the top 20 rural lenders in terms of total loan portfolio. — LWTN