PHL fundamentals to attract foreign banks
A SOLID consumer base coupled with a rapidly growing economy is seen to attract more foreign banks to set up shop in the Philippines even at a time of a highly volatile global market, a senior central bank official said, giving access to a sizeable range of retail customers for the years ahead.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. said the Philippines’ young population stands to attract more foreign players to operate here, amid expectations of a sustained pickup in consumer lending.
“The Philippines continues to be an attractive destination because of its strong economic and financial market fundamentals. You have the enviable combination of a consistently growing economy, a banking system that operates in a safe and sound manner and a demographic profile which suggests a strong retail market for several decades to come,” Mr. Espenilla said in an e-mail interview last week.
Nine foreign banks secured the BSP’s nod to set up shop in the Philippines over the last two years, following the passage of Republic Act 10641 that lifted the limit on the number of offshore players that can operate in the country.
BSP Governor Amando M. Tetangco, Jr. said in January that six offshore lenders have expressed interest in coming to the Philippines, which has been taken as a sign of confidence in the local financial system despite uncertainties in the global scene.
This comes at a time when markets are on a “wait-and-see” mode for developments in the United States • the world’s biggest economy • amid looming rate hikes from the Federal Reserve and policy reforms planned by the newly installed President Donald J. Trump.
Mr. Espenilla said favorable demographics allow the Philippines to remain a viable market for retail lending, wherein foreign lenders are eyeing to take a slice.
Economic managers have said that the Philippines will continue to enjoy a favorable demographic dividend for the coming years, with a bigger chunk of Filipinos making money as part of the workforce against the number of young and old dependents.
Consumer loans totalled P781.727 billion in 2016, soaring by 22.6% from the P637.507 billion in household credit extended by banks a year ago, according to central bank data.
The Philippine economy expanded by 6.8% in 2016, picking up from the previous year’s 5.9% which kept the country as one of the fastest-growing in the region. Private consumption accounted for about three-fourths of gross domestic product last year, coupled with a double-digit surge in investments.
Rising consumer credit comes on top of increased lending for corporates, especially now that the government is pursuing an infrastructure push with big-ticket projects on the pipeline.
“All in all, economic expansion suggests that there is room for business initiatives while the demographic profile suggests continuing demand in the retail market,” Mr. Espenilla added.
In an earlier report, debt watcher Fitch Ratings said the shift in focus on consumer lending could potentially lead to a higher share of bad debts held by Philippine banks, but added that strong liquidity profiles and a stable financial system would provide support for industry players.