Industry leaders remain bullish on the outlook of the domestic banking system, based on the latest report on the Banking Sector Outlook Survey for the second semester of 2018 published by the Bangko Sentral ng Pilipinas.
Survey results showed banks maintained their optimism on the country’s economic prospects, with 86.1 percent of respondents expecting the domestic economy to grow between 6 percent and 7 percent within the next two years.
The outlook on the Philippine banking system remains stable for 70.2 percent of all respondents, with the rest mostly expecting a stronger banking system.
Upbeat projections led more than 72 percent of respondents to expect double digit growth in assets and deposits, while 81.0 percent and 92.4 percent see loans and profits growing over 10 percent, respectively.
“The upgrade of the S&P Global Ratings Banking Industry Country Risk Assessment (BICRA) of the Philippines also contributed to the optimism,” the BSP said. S&P upgraded the country’s investment grade rating to “BBB+” with a stable outlook from the previous score of “BBB.” The upgrade was a notch away from the “A-“ rating, which is within the most-coveted A category.
The survey also showed universal and commercial banks were most eager to expand market coverage with 75.8 percent and 84.4 percent of respondents projecting double digit growth in assets and loans, respectively.
Meanwhile, 76.9 percent of rural and cooperative banks, ahead of other bank types, aim to grow deposits by 10 percent or more. Thrift banks, meanwhile, are most optimistic on their profits as 97.0 percent of respondents anticipate double digit net income growth.
To realize the expected bank growth, the respondents set a number of strategic priorities for their operations, including expanding the bank, optimizing the use of available technology and protection.
The use of technology is expected to reshape the future landscape of the banking system as 73.5 percent of banks have plans to use technology in their transactions in the near term.
The new section on organizational conduct and risk culture reveals that most banks are satisfied with their internal risk culture and underscores the importance of inputs from internal control functions in the business decisions of the board and senior management.
The banks deem institutional risk as the main threat towards achieving their targets. Money laundering risk, hiring or retention of talents, and credit risk top the list under institutional risks of all banks.
Cognizant of the internal and external risks affecting their business, the BSOS discloses that banks are formulating strategies to address these concerns and will leverage on the use of financial technology (fintech) for strategic efficiencies.