The local banking sector remains healthy as shown by the robust loan growth and continued profitability of its members, according to Fitch Ratings.
Fitch Ratings Singapore Financial Institutions Director Elaine Koh said the banks were seen to report broadly steady performance this year.
“The resilient domestic economic growth and liquidity inflows are likely to underpin sustained loan growth and moderate asset quality conditions for the Philippine banks,” Koh told the BusinessMirror.
According to him, Philippine Banks remain well capitalized and profitable and that asset quality has been improving since 2013.
The health of the banking sector added resilience against risks building from rapid credit growth.
Fitch also said the non-bank financial institution activities in providing credit facilities for buyers is low but rising quickly. Nonbank financial institutions include financing companies and real-estate developers, among others.
For the medium to longer term, Koh sees further consolidation in the banking sector.
She said factors that will continue to encourage consolidation include the liberalization of the banking sector and stringent regulations imposed by the Bangko Sentral ng Pilipinas (BSP).
“The rising compliance costs for banks due to Basel 3 reforms as well as the BSP’s continued initiatives to strengthen the prudential framework for its banks will continue to push banks to consolidate,” Koh said.
These developments will favour the big banks and place smaller banks at a relative disadvantage.
She said the upcoming Asean integration will open up the Asean market for the banks. In fact, she said, the Philippine market has since been opened to foreign banks.
Based on published financial reports, the country’s top banks posted growth in net income in the first nine months of the year.
BDO Unibank registered a net income of P17.6 billion, 5.38 percent higher than the P16.7 billion posted in the same period last year.
Bank of the Philippine Islands (BPI) net income rose to P13.8 billion, higher by 8.1 percent than P12.8 billion recorded a year ago.
“Our results demonstrate the benefits of a measured, disciplined approach to growing the bank’s core intermediation business,” BPI President and CEO Cezar Consing said.
Metropolitan Bank and Trust Co. (Metrobank) reported preliminary consolidated net income of P13.3 billion, slightly higher than a year ago’s P13.1 billion.
Yuchengco-led Rizal Commercial Banking Corp. (RCBC) and Sy-led China Banking Corp. (China Bank), both reported similar net income totaling P3.64 billion in the first nine months.
But RCBC’s net income grew 21 percent, while China Bank’s increased by 8 percent.