Based on the results of the latest Banking Sector Outlook Survey (BSOS) for the first semester of 2022, banking industry leaders are maintaining their growth outlook in the Philippine banking system for the next two years.
IMAGE CREDIT: www.bsp.gov.ph
According to the survey, expectations of double-digit growth in assets, loans, deposits, and net income, as well as a general improvement in the banks’ asset and loan quality indicators, support this level of optimism.
Philippine banks likewise plan to maintain risk-based capital, leverage, and liquidity ratios at levels higher than domestic and global standards to support expansion in their operations and promote institutional stability.
The BSOS gathers the sentiments of Presidents, Chief Executive Officers (CEOs), and Country Managers of universal and commercial banks, thrift banks, as well as top rural and cooperative banks on their growth outlook and risk assessment, business strategies, and insights on regulation and supervision within a two-year horizon.
Digitalization of products and services top priority of banks
In terms of loan quality, a lower number of respondents (around 52.4 percent from 58.9 percent in the previous BSOS) estimated a non-performing loan (NPL) ratio of above 5 percent in the next two years.
By banking group, the NPL ratio projection of universal and commercial banks (UKBs) shifted to within the range of greater than 2.0 to 3.0 percent from greater than 3.0 percent in the comparative year. Most UKBs also estimate that their NPL coverage ratio should be at least 75 percent to even more than 100 percent.
Digitalization of products and services was identified as a top strategic priority of banks in the next two years.
Related to this, the majority of banks have already embarked on improving their digital capabilities to better serve their clientele.
In terms of area of focus, banks identified deposit operations as the most important area of technology application followed by payment systems.
Banks investing in updated security tools, performing vulnerability assessments
Mindful that the accelerated shift of financial transactions towards digital platforms may give rise to greater cybersecurity risk, most of the respondent banks underscored the importance of continuous monitoring and surveillance, and a reliable information technology (IT) department to ensure a quick and appropriate response to IT and/or security incidents.
Banks have also invested in updated security tools, performed periodic vulnerability assessments, and enhanced their security framework, among others.
The survey result also revealed a remarkable increase in organizational awareness towards sustainable financing with 70 percent of respondent banks viewing such modes of financing as highly important from 61.7 percent.
Among those banks with plans of being involved in sustainable finance, most expressed willingness to finance projects in support of agriculture, solar power, transportation, and water supply management and treatment.
For the full report, check out the BSP website at https://www.bsp.gov.ph.