BANKS in the ASEAN region are likely to hurry along their digital transformations due to the pandemic and the resulting social distancing measures, Fitch Ratings said.

It noted that major banks in the Philippines, Malaysia and Singapore have seen surging online banking activity since the onset of the pandemics.

“This (trend), coupled with the greater adoption of open banking architectures in some jurisdictions, will force banks to innovate more quickly or risk falling behind,” Fitch Ratings said in a report Friday.

Meanwhile, Fitch Ratings said smaller banks are in danger in the shifting competitive dynamics, specifically those with below-par capabilities.

It noted that the expected acceleration of the digitalization process is unlikely to have a significant impact on lenders’ ratings in the near term, with the bleak operating environment due to the pandemic to have a more immediate impact.

According to Fitch, banks in major ASEAN markets have been growing their revenues at an 8% compound annual growth rate (CAGR) while their branch networks decreased 1%.

“With the exception of many Philippine banks, banks in the region had not generally been relying on the expansion of physical distribution channels to drive revenue before the pandemic,” Fitch Ratings said.

Because of the pandemic and the distancing measures, Fitch is of the view that banks will amplify the pursuit of growth in digital channels with existing branches likely to be further optimised towards higher value-add, cross-selling services.

UnionBank of the Philippines, Inc. has said it experienced a surge in online banking activity during the crisis. President and Chief Executive Officer Edwin R. Bautista said the bank’s early digital adoption and prior investments have helped it anticipatea the changes to client behavior during the lockdown.

“Due to the ECQ (enhanced community quarantine), most of our customers resorted to using our digital channels to continue banking with us. Because of this, we achieved record highs in the month of March in terms of digital account opening in our UnionBank Online app, as well as corporate enrollment into our platform, The Portal,” Mr. Bautista said in the bank’s virtual stockholders meeting, also held on Friday.

Mr. Bautista said early investment in digital capacity has facilitated critical operations even with 80-90% of the workforce restricted to working from home.

“We have learned a lot from this situation. Going forward, we believe that data analytics and AI will be critical cornerstone technologies that will drive us to the next level of our digitization,” Mr. Bautista said.

UnionBank posted a first-quarter net profit gain of 22% year-on-year to P2.641 billion. It has set aside P1.3 billion for expected loan losses, 7.6 times higher than the year-earlier total due to the potential impact of the public health emergency.

On Friday, UnionBank shares closed at P53.70, down 0.46% or 25 centavos. — Luz Wendy T. Noble