Philippine banks to see ‘robust’ credit growth as rates go down

PHILIPPINE BANKS may see strong demand for loans until next year as the economy remains strong and as borrowing costs continue to go down amid manageable inflation, S&P Global Ratings said.

- Katherine K. Chan

“Credit growth should stay robust,” S&P Global Primary Credit Analyst Nikita Anand said in a report released on Nov. 12. “Strong economic growth and lower inflation and interest rates will support credit demand.”

The banking sector's loans are likely to expand by 11%-13% this year and next, mainly driven by the retail sector.

Outstanding loans of universal and commercial banks grew by 10.5% year on year to P13.704 trillion at end-September, the slowest expansion seen since the 10.4% in July 2024.

However, as banks ramp up their lending to the consumer sector, asset quality could take a hit, which would also drive up credit costs, S&P Global said.

“A rising share of higher-risk (and higher-yielding) unsecured consumer loans and global uncertainties could lead to a manageable deterioration in the nonperforming loan ratio and keep credit costs elevated,” it said. “Large corporates, which form the bulk of the sector’s loan portfolio, should remain resilient.”

“We expect the sector's credit costs to stay elevated at 0.7%-0.8% of gross loans over the next two years. This level, while lower than peers, is slightly higher than the five-year pre-pandemic average of 0.5%.”