Weakening investor sentiment may weigh on PHL banks' performance

WEAKENING business sentiment could weigh on Philippine banks' performance amid slower loan demand among corporates, and with lower interest rates continuing to squeeze their margins, analysts said.

- - Aaron Michael C. Sy

However, lenders' ongoing efforts to grow their consumer portfolios could help ease some of the pressure and support both profit and credit growth.

"Philippine banks are expected to sustain double-digit loan growth despite softer corporate borrowing amid weak business sentiment... Banks are shifting toward retail and SME (small and medium enterprises) segments to offset slower demand from large corporates, supported by BSP's (Bangko Sentral ng Pilipinas) liquidity easing and strong deposit bases. While manufacturing loans remain in contraction, real estate and utilities continue to drive growth," Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion added in a Viber message.

He said they expect production loans to grow by 6.6% by December from an estimated 9.3% expansion in September, which would be the main drag on overall credit growth.

"Two major factors are driving this anticipated weakness: 1) A sustained decline in manufacturing loans, which could end the year down by 6.8%; and 2) A broad-based slowdown in loan demand across other production sectors," he said.