Manila: The banking industry’s outlook for the next two years remains optimistic despite macroeconomic challenges, results of the 2023 Banking Sector Outlook Survey (BSOS) released on Thursday showed.

The BSOS gathers the sentiments and outlook of presidents, chief executive officers, and country managers of Philippine banks over a two-year horizon.

The BSP said 147 banks responded out of the 173 banks surveyed across banking groups.

The total assets of these respondent banks accounted for 97.7 percent of the total assets of the country’s banking system as of December 2023.

“Overall, respondent banks expect double-digit growth in their assets, loans, deposits, and net income, as well as plan to maintain robust capital and liquidity positions to maintain institutional stability,” the BSP said.

Survey results showed that 64.6 percent of the respondent banks expect a stable banking system in the next two years, while 34.7 percent project a stronger banking system.

The BSP said 70.1 percent of the responden
t banks also project double-digit growth in their assets.

The results also point to improvement in the banks’ expectations on the quality of their loan portfolio as fewer respondent banks (48.7 percent from 52.4 percent in the 2022 BSOS), anticipate a non-performing loan (NPL) ratio of above 5 percent in the next two years.

“Across banking groups, most foreign banks and universal and commercial banks are optimistic, with the former anticipating a less than 1 percent NPL ratio while the latter foreseeing their NPL ratio to settle within the range of 1 to 5 percent,” the BSP said.

Survey results, however, showed that smaller banking groups are more pessimistic as the majority of thrift, rural, cooperative, and digital banks expect their NPL ratio to be over 5 percent.

In terms of loan loss provisions, the majority of respondent banks plan to maintain a high NPL coverage ratio, ensuring adequate coverage of potential losses in their loan portfolio.

The BSP said restructured loans are projected to be at 2 pe
rcent of total loans for most respondent banks.

In terms of priorities, the BSP said most respondent banks indicate that they will continue to focus on corporate and retail lending, providing financial support to sustainable and green projects, including key sectors such as micro, small, and medium enterprises, real estate, and households.

More than half of respondent banks also plan to invest in digital transformation to enhance their financial products and services.

Respondent banks, meanwhile, said credit, operational, and macroeconomic risks continued to be the primary concern of respondent banks, as such they are actively enhancing their risk governance to safeguard interest of their depositors, and investors, as well as maintain the safety and soundness of their institutions.

Source: Philippines News agency