Central Bank of the Philippines

06/13/2019 | Press release | Distributed by Public on 06/13/2019 00:22

Industry Leaders Maintain Bullish Outlook on the Banking System

06.13.2019

The BSP has published the Report on the Banking Sector Outlook Survey (BSOS) for the Second Semester of 2018. Survey results show that banks maintain their optimism on the country's economic prospects as 86.1 percent of respondents expect the domestic economy to grow between 6 percent and 7 percent within the next two years. More importantly, 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 expect loans and profits to grow more than 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.

Universal and commercial banks (U/KBs) are 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 (R/CBs), ahead of other bank types, aim to grow deposits by 10 percent or more. For their part, thrift banks (TBs) 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 the following strategic priorities for their operations: to grow the bank; to optimize use of available technology; and to protect the bank. Meanwhile, 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 U/KBs, TBs, and R/CBs, respectively. 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.

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1The BSOS gathers the sentiments of the Presidents/Chief Executive Officers/Country Managers of U/KBs, TBs and the top 20 R/CBs in terms of loan portfolio related to their growth outlook and risk assessments, business performance strategies, and insights on regulation and supervision within a two-year horizon. It is also part of the BSP's surveillance toolkit to promote the sustained resilience of the banking system. The full report is also released in electronic format as a downloadable PDF file on the BSP website (www.bsp.gov.ph/publications/regular_pbsos.asp).