FIRST Philippine banks’ profits are expected to strengthen in 2022, as the economy recovers with an expected GDP growth of 7.2%
Compared to regional peers such as Indonesia, Malaysia, and Thailand, the Philippines’ ratio of restructured loans is noted to be significantly lower
Some respite for PH banks with credit costs sighted to decline LENDING & CREDIT
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hilippine banks’ credit costs are expected to decline in 2022 as most stressed loans are already recognised or restructured, S&P Global Ratings reported. Credit costs are forecast to drop further to 0.6% to 0.8% of loans, following a steep decline to about 1% throughout 2021. The sector’s nonperforming loans (NPLs) of 4% and restructured, performing loans–which is at 2.2% of total loans–are at manageable levels, the ratings agency added.
Some slippage is possible from the restructured pool, especially from the services sector and from stretched consumers, S&P warned. However, Philippine banks are well placed to absorb this residual stress given their improved capitalisation and adequate provisioning coverage. “Overall, we believe the banking sector’s NPL ratio has peaked and is likely to gradually decline supported by recoveries and write-offs,” S&P wrote. Compared to regional peers such as Indonesia, Malaysia, and Thailand, the
Philippines’ ratio of restructured loans is noted to be significantly lower. Along with lower credit costs, Philippine banks’ profits are expected to strengthen in 2022, as the economy recovers with an expected gross domestic product growth of 7.2% in the current year. The banking sector’s return on average assets is expected to return to the pre-pandemic level of 1.2%, compared with 1.1% in 2021, on the back of higher credit growth, increase in fee income as business activity picks up, and lower credit costs. Banks can also look forward to an uptick in demand for loans, with S&P forecasting credit growth of between 5% and 7% throughout the year. “Any reduction in banks’ regulatory reserve requirement can push credit growth toward the higher end of our forecast,” S&P said.
YOY net loans growth at the largest Philippines banks (%)
Source: S&P Global Market Intelligence
Tech failures plague banks ASIA PACIFIC
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ome of Asia’s biggest banks have had a rough few months due to technical difficulties. Japan’s Mizuho Bank faced a new set of disruptions, this time in its corporate banking services, last 11 January, an official spokesperson said. This is just the latest in a line of technical failures that the bank has suffered from over the past year. From February to March 2021, Mizuho suffered several system failures that caused thousands of its ATMs to stop working in the days between February and March. Notably, the bank suffered four glitches in a span of two weeks, with over 4,300 of the bank’s ATMs in Japan affected. As a result, Mizuho Bank submitted a business improvement plan to Japan’s Financial Services Agency (FSA), as ordered by the FSA.
Singapore’s DBS Bank also suffered a major IT outage in November 2021, resulting in customers being unable to access the mobile and even PayNow accounts. Following this, the Monetary Authority of Singapore (MAS) ordered DBS on 7 February to set aside over US$690 (S$930m) in additional regulatory capital to guard against operational risks. MAS has also directed DBS to appoint an independent expert to conduct a comprehensive review of the incident, including the bank’s recovery actions. An independent review is also required to assess how a similar incident can be prevented in the future. The additional capital requirement will be reviewed when MAS is satisfied that DBS Bank has addressed the identified shortcomings, the financial regulator said.
Mizuho suffered several system failures that caused thousands of its ATMs to stop working
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