The banking industry maintains a positive outlook for the next two years, despite the macroeconomic headwinds faced in 2023, according to the Bangko Sentral ng Pilipinas (BSP).
Based on the 2023 Banking Sector Outlook Survey (BSOS), the BSP said respondent banks expect double-digit growth in assets, loans, deposits and net income and plan to maintain robust capital and liquidity positions to maintain institutional stability.
The results also point to improved expectations on the quality of loan portfolio as fewer respondent banks (48.7 percent from 52.4 percent in the 2022 survey) anticipate a non-performing loan (NPL) ratio of above 5 percent in the next two years.
Across banking groups, most foreign banks and universal and commercial banks are optimistic, with the former anticipating a less than 1 percent NPL ratio, while the latter foresee their NPL ratio to settle within a range of 1 percent to 5 percent.
Smaller banking groups are more pessimistic, with the majority of thrift, rural, cooperative and digital banks expecting their NPL ratio to be over 5 percent.
The BSP said that in terms of loan loss provisions, most respondent banks plan to maintain a high NPL coverage ratio to ensure adequate coverage of potential losses in their loan portfolio.
Restructured loans are projected to be a small percentage, or at 2 percent, of total loans for most respondent banks.
“As to priorities, most respondent banks indicate that they will continue to focus on corporate and retail lending, providing financial support to sustainable and green projects, including key sectors such as micro, small, and medium enterprises, real estate and households,” the BSP said.
“More than half of respondent banks are also investing in digital transformation to enhance their financial products and services,” it said.
The BSP survey showed that respondent banks see credit, operational and macroeconomic risks as primary concern and are actively enhancing their risk governance to safeguard interest of depositors and investors and maintain the safety and soundness of their institutions.
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