S&P Global Ratings is counting on the banking industry’s balance-sheet strength and support measure to cushion the financial shocks as government imposed lockdowns addressing the coronavirus disease 2019 (Covid-19) pandemic.
In a recent statement, the global debt watcher said that it has downgraded ratings for many banks in the past month as businesses were ordered closed to stem the Covid-19 contagion.
“We continue to expect that bank rating downgrades this year due to the Covid-19 pandemic will be limited by banks’ strengthened balance sheets over the past 10 years, the support from public authorities to household and corporate markets, and our base case of a sustained economic recovery next year,” the credit-rating agency firm said.
Analysts have been saying that the Philippine banking system’s capitalization can withstand the pandemic. As of end-April, the banking sector’s capital account reached P2.35 trillion, which was nearly 9-percent higher compared to P2.16 trillion for the same
period last year.
The Bangko Sentral ng Pilipinas, meanwhile, has been providing relief by cutting policy rates and reserve requirements.
S&P Global Ratings Credit Analyst Alexandre Birry said that the firm has taken 212 rating actions on banks related to pandemic and oil shock recently, and 76 percent of these were outlook revisions. The analyst added that around 30 percent of banks were now tagged with a negative outlook.
“We expect that second-quarter results will shed more light on the relative impact of the pandemic on banks across the globe, but the full effect on asset quality will likely only become clear much later in the year,” Birry explained.
Last month, S&P affirmed its “BBB+” long term and “A-2” short-term sovereign credit rating for the country as it projects the economy to have an above-average growth over the medium term.
“The ratings are also supported by the economy’s sound external settings. These are weighed against the Philippines’ lower-middle-income economy,” the debt watcher explained.
Its long-term outlook remains stable on the back of normal policymaking seen to support credit metrics and anticipated economic recovery next year.
While S&P forecast that Philippine economy is likely to decline by 0.2 percent this year, it noted that gross domestic products might rise by 9 percent next year if the virus will be contained by the first half of 2021 across the world. The growth will be driven by investment and exports, it added.
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