PH lenders seen to endure credit risks—Moody’s

Global debt watcher Moody’s Investors Service on Monday acknowledged the strength of Philippine banks, saying they are in a position to weather higher credit risks that may arise from the onslaught of the coronavirus disease 2019.

Moody’s said in a report that Singaporean, Malaysian and Philippine banks had the best asset quality among regional peers, with non-performing loan ratio below 2 percent.

It said the challenging economic and credit conditions stemming from COVID-19 would weigh on ASEAN and Indian banks’ asset quality and profitability.

“In ASEAN and India, bank downgrades in 2020 have been driven by Indian banks, following the downgrade of the sovereign in June,” said Moody’s vice president and senior credit officer Eugene Tarzimanov.

“That said, the majority of the banks in the region are well-positioned at their ratings, despite a higher share of negative outlooks on bank ratings,” he said.

Moody’s said it was expecting asset quality and profitability to deteriorate from good levels in 2019 across most banking systems, “with Singapore, Malaysia, and the Philippines having the best asset quality with non-performing loans below 2 percent. And while government support measures will offset some of the pressure on banks, they will not fully eliminate the negative impact.”

It said that despite the challenging outlook, the majority of banks were adequately capitalized and their funding and liquidity would remain sound and stable in 2020 and 2021.

The Philippine banking system’s strength was also recognized by S&P Global Ratings’ Banking Industry Country Risk Assessment as it retained the country’s rating of 5, citing the Philippine banks’ good capital position and provisioning for non-performing loans that put the banking system on a relatively strong footing to manage rising risks from the economic slowdown driven by COVID-19.

The BICRA also underscored the high level of stable customer deposits that support the banking system’s funding profiles.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno earlier assured the continued safety and soundness of the banking system amid uncertainties and challenges in the current business environment.

He said the adoption of global standards such as the Basel III framework and measures to promote good corporate governance and effective risk management systems had prepared banks for these challenging times.

“The robust BSP surveillance of emerging threats in the industry is also a product of its strong partnerships with peer regulators both within and outside the country, other government institutions, and industry associations,” he said.

Topics: Moody’s Investors Service , COVID-19 , Eugene Tarzimanov , S&P Global Ratings
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