December 4, 2024 | 12:00am
MANILA, Philippines — Sy-led BDO Unibank Inc. sees continued loan growth in 2025, citing robust economic activity, steady demand for loans and potential regulatory adjustments.
In a forum hosted by the Tuesday Club at the EDSA Shangri-La Hotel, BDO Capital president and head of the Investment Banking Group Eduardo Francisco said the banking sector has performed strongly this year, driven by strong demand for loans.
“We’re very positive. We’re seeing growth in all sectors. And it’s not just BDO, It’s the whole banking industry,” he said.
Francisco said BDO has seen around 30 percent in loan growth so far this year, which indicates that businessmen and traders borrow money in advance to build up their inventories.
He said that BDO’s loan growth significantly outpaced the industry average of around 10 percent. “The multiplier effect of loans on gross domestic product is about 1.3 times, so even with the weaker-than-expected third-quarter GDP (gross domestic product), the real economy is growing well.”
The Philippine economy grew by only 5.2 percent in the third quarter, slower than the 6.4 percent in the previous quarter and six percent a year ago. From January to September, growth averaged 5.8 percent.
Meanwhile, loans disbursed by universal and commercial banks amounted to P12.5 trillion in end-October this year, up by 10.6 percent from the P11.31 trillion recorded in the same period last year.
Francisco also outlined BDO’s projections for the fourth quarter. While the government’s target of six percent GDP growth for the year is challenging, he remains optimistic about a strong finish amid manageable inflation, stable oil prices and improving economic indicators.
The banker also emphasized the role of monetary policy in sustaining loan growth, particularly the potential for further reductions in the reserve requirement ratio (RRR) by the Bangko Sentral ng Pilipinas (BSP).
“Every one percent reduction in the RRR frees up almost P200 billion for loans. If the BSP brings it further down, there will be more funds available for lending. Then with lower interest rates, the economy, the private sector, the middle market can borrow more money,” he said.
However, there is a possibility that the BSP could pause from their easing cycle next week, especially if the US Federal Reserve keeps rates steady.
“If the US Federal Reserve maintains interest rates while the BSP reduces rates, the peso may weaken further, potentially breaching 59 or 60 to the dollar. For BDO, we are projecting an exchange rate of around 59 next year,” Francisco said.
The BSP delivered a 25-basis-point cut last Oct. 16, bringing the total cuts to 50 basis points since it began its easing cycle in August. This also brought the key rate to six percent.
Prior to the cuts, the BSP kept its policy rate steady for six straight meetings since November 2023. From May 2022 to October 2023, it hiked rates by 450 basis points to tame inflation.
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