Philippine lenders may remain profitable in Q1 amid high rates
By Aaron Michael C. Sy, Reporter
PHILIPPINE BANKS are expected to remain profitable this quarter as interest rates and demand for loans remain elevated.
“For the first quarter of the year, continued growth [is expected] amid a high interest rate environment also to be driven by better loan demand,” Luis A. Limlingan, sales head at Regina Capital Development Corp., said in a Viber message. “Improving economic conditions are expected.”
Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. earlier said the central bank is likely to cut interest rates until the second half of the year due to inflation risks.
The Monetary Board raised its key rate by 450 basis points to a near 17-year high of 6.5% from May 2022 to October 2023.
Some lenders hit record earnings last year.
“In 2023, banks with increased consumer segment growth and diversified revenue streams saw the biggest earnings gains,” Mr. Limlingan said.
The top gainers last year were BDO Unibank, Inc., Metropolitan Bank & Trust Co. and Bank of the Philippine Islands, whose earnings hit a record,
First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.
She noted that competition among banks would be tough in terms of loans and deposits, given the high interest rate environment.
Banks may also find it difficult to surpass their earnings last year, she added.
“Banks will still perform well as loan spreads remain wide and enable loan repricing at elevated asset yields,” Ms. Ulang said.
Bankers Association of the Philippines (BAP) Managing Director Benjamin P. Castillo on Wednesday said banks are optimistic about earnings this year.
“At worst, banks could be at the same level this year,” he said. “But banks are very aggressive. I cannot quote a number but for sure everybody was pleasantly surprised with some very significant uptick in 2023.”
The industry could still face headwinds due to issues overseas including a slowing US economic growth and the war between Russia and Ukraine, Mr. Castillo said.
Mr. Limlingan added that aside from geopolitical tensions, lenders still have to deal with inflation and the need for digitalization.