Fitch maintains positive outlook on Phl banks

BMI Research, a member of the Fitch Company, has retained the positive outlook on the country’s banking sector as strong macroeconomic fundamentals are likely to offset heightened risks.

In its latest view, the research arm of the debt watcher said a favorable macroeconomic backdrop, stable asset quality, strong capitalization and liquidity profiles, and prudent monitoring by the Bangko Sentral ng Philipinas (BSP) support the country’s banking industry.

The unit also cited the healthy level of non-performing loans (NPLs) of Philippine banks.

“The outlook for the Philippine banking sector as a whole remains fairly constructive as a robust macroeconomic environment, low degree of NPLs, and healthy capitalization and liquidity structures will help it to weather heightened global uncertainty,” BMI Research said.

However, it pointed out pockets of weaknesses exist among smaller thrift and rural banks.

It noted the structure of the banking sector is heavily fragmented and heterogeneous, resulting in uneven risks spread across the industry.

“The larger commercial banks are well poised to weather market volatility but the smaller rural and thrift banks have a higher exposure to consumer and agricultural loans, which have had a higher tendency to turn sour, leaving them more vulnerable to economic shocks and market volatility,” BMI Research added.

According to the company, the current wave of consolidation of smaller thrift and rural banks to continue as they face increased competition from their foreign counterparts.

“We expect the current wave of consolidation to continue as bigger and stronger players in the industry buy out their weaker peers to gain market share in the face of heightened foreign competition,” it said.

–