RETAIL LOANS are expected to boost local banks.

S&P GLOBAL Ratings sees opportunity for growth in the Philippine banking sector as lenders continue to expand their retail loan segments.
On Wednesday, the global debt watcher said it sees a lot of opportunities in the local banking industry in terms of lending diversification as the sector is still dependent on corporate loans.
“The main issue right not is that there’s a lot of concentration [in the corporate segment.] They have a lush conglomerate-focused loan books, Ivan Tan, S&P director for financial institution ratings, said in a webcast yesterday.
Mr. Tan added that the proportion of the lenders’ retail lending versus their total loan book is “extremely small.”
Despite this, the credit rater said local banks have recognized their small retail loan portfolios and in turn, are moving to ramp up their distribution network.
“The banks have recognized this for the last three to four years. They have been trying to diversify their retail and consumer loans as they ramp up their branch network,” Mr. Tan said.
Aside from branch expansion, better underwriting practices bolstered by the local credit bureau will also help banks balance their loan book to be more retail-focused.
“They also have a consumer credit bureau. That would facilitate the underwriting consumer loans.”
In May, the debt watcher upgraded its Banking Industry Country Risk Assessment score for the Philippine banking industry to “6” from the previous “7.”
It cited the state-led Credit Information Corp. (CIC) as the agency help the banks improve underwriting practices in the consumer loans segment.
“We definitely see a lot of opportunities in terms of rebalancing of loan portfolio from chunky corporate loans to a more balanced, retail-focused loan book,” Mr. Tan added.
In April, S&P revised upward its rating outlook for the Philippines to “positive,” hinting at a possible credit upgrade in the coming months.
The Philippines currently holds a “BBB” rating from S&P, a notch above minimum investment grade.
A higher credit rating improves the chances for a country to borrow funds from foreign sources at cheaper rates. — K.A.N. Vidal