Moody’s: PH banks well positioned to manage weakening economy
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Moody’s: PH banks well positioned to manage weakening economy

Moody’s Investors Service said its outlook for the Philippine banking system remains stable as capital buffers remain strong despite the pandemic.

With its solid capital levels and ample stock of liquidity reserves, local banks look well positioned to deal with uncertainties that will pressure asset quality.

“Their capital ratios will remain high in the next two years as their internal capital generation is likely to keep pace with loan growth,” Moody’s said in a report, “Banks – The Philippines: Loss buffers will shield sector from growing asset risks amid coronavirus resurgence.”

“Despite the spike in NPLs (non performing loans) in the past 18 months, rated Philippines banks maintain sufficient buffers to cover new loan losses after proactively increasing loan-loss provisions in early 2020 in anticipation of increases in problem loans caused by the pandemic,” said Moody’s.

Moody’s noted that its rated banks’ asset-weighted average for common equity ratios would still remain above 15 percent in 2023.

“While the pandemic has severely disrupted the Philippine banking system, its long term growth prospects remain intact because the country has a large, young population that creates a pool of future customers,” Moody’s said.

“Provision expenses will remain above pre-pandemic levels, in tandem with growing problem loans. Net interest margins are likely to contract as banks gradually reprice loans lower amid weak credit demand and low interest rates,” it added.

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