More banks see stronger growth in next 2 years

Published November 28, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

Philippine banks are projecting a 6-7 percent GDP growth in the next two years, which should lift profits and assets outlook while growing their banks and taking advantage of technology as business strategy, a central bank survey said.

MB file photo.
MB file photo.

Based on the Bangko Sentral ng Pilipinas’s (BSP) first semester 2019 Banking Sector Outlook Survey (BSOS) – which covered all banks in the country – 83.5 percent still think the economy will grow 6-7 percent in the next two years despite global uncertainties and market volatilities.

The big banks led 45.6 percent of surveyed banks that said they expect GDP to grow between six to 6.3 percent in the next two years while 41.2 percent expect higher or 6.3 to 6.6 percent.

The BSOS said that because of the bullish economic outlook, 45.9 percent of banks surveyed expect stronger banks in the next two years, this is more confident banks compared to the previous survey or 33 percent in the second semester of 2018. About 52.9 percent of banks said the banking system will remain stable until 2021.

In the meantime, the BSP said 73.5 percent of surveyed banks expect double-digit growth in assets, however this is lower compared to previous forecast of 80 percent.

“The growth in assets was expected to be driven by credit expansion as 82.9 percent of the banks projected double-digit growth in their loan portfolio for the current survey,” according to the BSP. Of this number, 87.5 percent were big banks that expected credit expansion in the next two years.

The BSOS said banks have two main business strategy to ensure they will take advantage of the sustained GDP growth: to grow the bank and to optimize the available technology for growth and efficient banking operations.

“Majority (of banks) believed that there is a need to grow the bank by expanding client base, by deepening customer relationships, and by developing new products,” said the BSP.

“In line with the emerging market trends and evolving client needs, the rapid pace of digital technology is considerably reshaping the financial services landscape. Thus, most of domestic universal/commercial banks and rural/cooperative banks disclosed that they will prioritize the optimization of available technology through digital operations and customer service as well as leverage on financial technology for strategic efficiency in the next two years,” noted the BSP.

The BSP said new BSOS section on fintech/cybersecurity plans also emphasized the industry’s “aptitude on the use of technology-enabled solutions and strong interest in participating in the digital finance ecosystem.”

“This is expected to add further impetus to the growth and operational efficiency of banks,” said the BSP.

The latest BSOS report noted that most banks are planning or are already employing technology in their operations such as on data security and privacy and in applying know your customer (KYC) procedures and loan scoring.

As in previous surveys, institutional risk remain as banks’ top concern which include cybersecurity threat, regulatory/compliance risk, credit risk, and market competition. “Banks also recognize the need to keep a high level of risk-based capital and liquidity; and to strengthen organizational conduct and risk culture in order to thrive amid the volatility and complexity of the operating environment,” said the BSP.

The BSP launched the BSOS in 2018. The survey, as described by the BSP, “serves as a measure of proactive and forward-looking approach to
surveillance and financial supervision.”

The survey mainly tapped banks’ top executives and officials in assessing their outlook and/or sentiments “in the conduct of regulatory risk surveillance and formulation of supervisory framework.”