Lower interest rates seen to dampen banks' earnings

Philippine banks are likely to feel one of the largest impacts of declining interest rates in Asia-Pacific, with Fitch Ratings projecting significant pressure on local lenders' profitability.

- By KEISHA TA-ASAN

In a report, Fitch Ratings said that Philippine banks would likely face the greatest pressure from reduced policy rates, assuming no strategic countermeasures are taken to bolster earnings.

"Fitch Ratings believes lower interest rates in Asia-Pacific will have the most impact on the profitability of banks in China and the Philippines, assuming no remedial action is taken by banks to boost earnings," it said.

Fitch expects interest rates in the Philippines to fall by about 200 basis points by the end of 2026. If realized, this will be the largest decline in borrowing costs across the Asia-Pacific.