Philippine banks maintain optimistic outlook

The Philippine banking industry's outlook for the next two years remains positive, according to the 2023 Banking Sector Outlook Survey (BSOS). Overall, respondent banks anticipate double-digit growth in their assets, loans, deposits, and net income. They also plan to maintain robust capital and liquidity positions to ensure institutional stability.

The survey results indicate improved expectations for loan portfolio quality. Fewer respondent banks, now at 48.7 percent from 52.4 percent in the 2022 BSOS, expect a non-performing loan (NPL) ratio of over 5 percent in the next two years.

Most foreign banks and universal and commercial banks are optimistic, with the former anticipating a less than 1 percent NPL ratio and the latter expecting their NPL ratio to be between 1 and 5 percent. Smaller banking groups, such as thrift, rural, cooperative, and digital banks, are more pessimistic, with a majority expecting their NPL ratio to exceed 5 percent.

To address potential losses, most respondent banks plan to maintain high NPL coverage ratios. Restructured loans are projected to be a small percentage, or at 2 percent, of total loans for most banks.

As for priorities, most respondent banks will continue to focus on corporate and retail lending, supporting sustainable and green projects, including key sectors such as micro, small, and medium enterprises, real estate, and households. Over half of respondent banks are also investing in digital transformation to enhance their financial products and services.

Credit, operational, and macroeconomic risks remain the primary concerns for respondent banks. They are actively enhancing their risk governance to safeguard the interests of their depositors and investors, as well as maintain the safety and soundness of their institutions.