The health and economic crisis last year has pushed Philippine domestic banks to be better and innovate on their services, being one of the essential sectors that people depend on these times. But as the crisis continues, domestic banks experienced a different impact on their market performance.

The industry had seen stability towards and during the beginning of 2021 with the sustained growth in assets, strong capital position, adequate liquidity buffers, ample loan loss reserves, and profitable operations, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno shared in a speech at the 31st Bankers Institute of the Philippines, Inc. Virtual Convention held last May.

“We are optimistic that the Philippine financial system is capable of withstanding the risks and challenges of the COVID-19 (coronavirus disease 2019) pandemic,” Mr. Diokno said. “Yet, as considerable economic uncertainty remains, the BSP continues to monitor relevant risks and vulnerabilities arising from banks’ activities through enhanced surveillance mechanism.”

Mr. Diokno maintained the observation by June for the domestic systematically important banks (D-SIBs). As reported by BusinessWorld in the said month, The BSP governor deemed that these banks remained strong despite the crisis, which was able to support the overall stability of the financial system.

However, by July, outlooks on six Philippine banks went from “stable” to “negative” as reported by Fitch Ratings. The credit rating agency nonetheless kept the country’s “BBB” rating.

Fitch covers the government-owned Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) and four commercial banks including the Bank of the Philippine Islands (BPI), Philippine National Bank (PNB), BDO Unibank, Inc. (BDO), and Metropolitan Bank & Trust Co. (Metrobank).

According to Fitch, the outlook revision to negative “reflects increasing risks to the credit profile from the impact of the pandemic and its aftermath on policy-making as well as on economic and fiscal out-turns.”

The agency added that the sluggish economic recovery would likely persist to weigh on the asset quality and financial performance of the banking system in the near term. It also expected the industry non-performing loan (NPL) ratio to increase and the revenue headwinds to probably continue with lower market-related income and compressed margins.

“However, we believe the majority of the banks continue to be sufficiently capitalized to withstand further stress in the system, while a recently enacted Financial Institutions Strategic Transfer Act (FIST), which allows banks to sell impaired assets to SPVs (special purpose vehicles) and amortize any losses from sale by up to five years, could facilitate faster NPL resolution and allow the system to embark on a speedier recovery,” Fitch said on its commentary.

BusinessWorld further reported in its 2nd Quarterly Banking Report that reimpositions of COVID-19 lockdown and renewed concerns on the virus have clouded the outlook on the country’s financial markets.

“In [the second quarter], domestic financial markets showed mixed trends with investor sentiment influenced by COVID-19-related developments alongside mixed economic data releases that impacted the economic outlook,” BSP was quoted as saying.

Given the volatilities, the central bank expected financial market participants to be watchful of the indicators dealing with virus containment as well as key economic trends and policy responses in the country and overseas.

S&P Global Ratings reported last year that the Philippine banking industry might recover to its pre-pandemic financial strength beyond 2022, but the credit rating agency added that this would be determined by the degree of economic damage from the crisis.

Banks’ performance

Despite the headwinds experienced due to such global health and economic crisis, several domestic banks have managed to perform well in providing financial services. This has been shown with the accolades that some Philippine banks obtained from international publications.

For Asiamoney, a division of global media group Euromoney Institutional Investor, the best domestic bank in the Philippines is Metrobank during its Best Bank Awards for 2021. The company’s “sheer resilience” amid the difficult time made it stand out, according to Asiamoney’s editor Rashmi Kumar in a press release by Metrobank.

The bank said in the same statement that its resilience is credited to the lessons learned from surviving the 1997 Asian Financial Crisis. It also practiced a prudent and proactive approach in managing its portfolio to protect asset quality as well as maintain long-term profitability and capital strength. Such an approach, for Metrobank, has contributed to its strong start this year with a 28% growth of net income to P11.7 billion in the first half.

BDO Capital & Investment Corp., a wholly-owned subsidiary of BDO, meanwhile received a nod from Asiamoney for being the country’s best corporate and investment bank this year.

According to the publication, BDO Capital has participated in at least 180.5 billion dollars of equity and debt issues since 2000. Additionally, the bank had performed leading roles in initial public offerings, government and corporate bond issues, preferred share sales, term loans, and project finance deals.

BDO is the largest bank in the Philippines with its P323,253,896,842.67 total assets as of June, as recorded in the data of BSP.

In providing digital banking services, the Rizal Commercial Banking Corporation (RCBC) reigned in the Philippines with several recognitions from international organizations.

RCBC received the Asiamoney award for “Best Digital Bank in the Philippines” in 2020 and 2021. Last year, the bank was also recognized as the country’s “Most Innovative Internet Banking Service Provider” by London-based financial publication The Global Economics and the “Best Digital Bank in the Philippines” by Hong Kong-based institutional investment magazine Annual Alpha Southeast Asia Best FI Awards.

RCBC’s innovations during the lockdown have helped the country in accessing financial services. Among which are its ATM Go which helped in distributing social amelioration funds to remote areas and its DiskarTech that give the country its first financial inclusion app.

Union Bank of the Philippines (UnionBank) likewise garnered multiple honors from international publications for performing best in banking support for small and medium enterprises (SMEs). The country’s tenth largest bank in terms of assets is Asiamoney’s back-to-back “Best Bank for SMEs in the Philippines” and Asian Banking & Finance’s “SME Bank of the Year Philippines 2021.”

UnionBank has been addressing the challenges faced by SMEs even before the pandemic with its MSME Banking Hub. Last year, its timely release of the UnionBank SME Business Banking app has attended to the shifting needs of SMEs with various digital options and functionalities to manage their financial transactions. The platform saw growth with 71% new SME Business and Personal accounts from 2020 until June of this year.

Among the other helpful platforms for SMEs that UnionBank has made are the UnionBank Business Loan and UnionBank GlobalLinker. Aside from financial services, the bank has also organized webinars to expand SME’s learning opportunities.

UnionBank President and CEO Edwin R. Bautista assured that “we will continue to support MSMEs so they can be globally competitive in this new digital age as we continue our efforts to ‘Tech Up Pilipinas’ while pioneering innovations for a better world.” — Chelsey Keith P. Ignacio