WHILE lending in the Philippines remains robust in the face of a global slowdown, banks across the region endeavor to lend beyond their respective borders in a bid to boost loan growth and obtain higher revenues.
The global credit watcher Standard & Poor’s bared this development on Tuesday, saying some of the largest and most active banks in the region actively seek exposure elsewhere in the region.
S&P bared the results of a study in which major banks in Asia-Pacific increased their credit exposures at a faster pace overseas than in their home markets
“Major banks in Hong Kong, Singapore, Malaysia, Taiwan, and Japan are seeking higher yields and growth opportunities in cross-border loans, mainly within Asia,” Naoko Nemoto, a credit analyst at Standard & Poor’s said.
“Even China’s major banks–which enjoy relatively high margins at home–have increased their appetite for overseas exposure to diversify their revenue and deliver better services to clients. We expect this trend to continue for at least several years, while asset reductions by European banks could create more opportunities for Asia-Pacific banks to boost their presence in global markets,” Nemoto added.
According to S&P, banks in the region have been forced to seek markets overseas as home markets begin to turn in less than anticipated returns.
Slower markets at home are spurring Asia-Pacific banks to look abroad to boost growth, it said.
But while venturing outside of their respective markets present some risks, S&P expressed optimism the region’s lenders will avoid any significant erosion of their credit quality, given their cautious strategies and improved risk management.
“We expect that the future benefits and risks of the banks’ forays overseas will largely depend on how they execute their strategies and adapt to new environments,” Nemoto said.
Most of the banks are based in Singapore, Hong Kong and China, their books showing far more rapid loan growth overseas than that posted in markets where they are domiciled.
In the Philippines, bank lending continue to post robust improvements, the aggregate lending as at end-May this year having grown by another 14.7 percent to P2.62 trillion.
The previous April, bank lending also grew at a double-digit rate averaging 19.2 percent.
The bulk of these loans were production or business-related lending and grew also at a rate of 14.7 percent while the rest represented consumption loans which grew by only 16.8 percent from 17.5 percent a month earlier on account of a slowdown in auto loans.
The slower auto loan growth during the period was blamed on supply disruptions rather than on the appetite of car buyers in the Philippines, various bankers said earlier.