Bank chiefs offer upbeat outlook despite uncertainty
PHILIPPINE banks are optimistic about the prospects for business recovery this year despite the uncertainty caused by the Russian-Ukrainian war and the upcoming elections.
Nestor V. Tan, president and CEO of BDO Unibank, Inc., said the bank expects proIft grow by 5 to 10% this year, after the good start observed in the Iffirst three months.
Tan said lending is expected to increase by 8-12% amid relatively stable markets and normalizing asset quality and delinquencies.
BDO, the country’s largest bank by assets, on Friday reported net profit up 13% year on year to 11.7 billion pesos in Iffirst trimester.
Despite the improvement seen in the economy with the easing of restrictions, Mr Tan said there was still a “mixed outlook” for 2022 due to local and international developments.
“Mobility is back. However, inflation remains a concern driven by supply chain disruptions and due to the geopolitical crisisflticts,” Tan said at the bank’s annual shareholders meeting on Friday.
Metro Manila and most provinces have been under the most lenient Alert Level 1 since March as coronavirus disease 2019 (COVID-19) infections have declined. This has allowed more businesses to fully resume operations.
Central bank officials said the impact of the Russian-Ukrainian war on the country will see higher inflation as oil prices soar. Headline inflation accelerated to 4% in March from 3% in February, matching the upper limit of the BSP’s 2-4% target.
The central bank last month raised its inflation forecasts for 2022 and 2023 to 4.3% and 3.6%, respectively, taking into account high oil and commodity prices.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno has previously stated that the IfThe financial exposure of Philippine banks to both Russia and Ukraine is very minimal.
BDO’s Mr. Tan also pointed to the sense of risk ahead of the upcoming national elections on May 9.
“The elections will clearly bring diffdifferent expectations and different policies. Companies paused before investing,” Tan said.
Separately, East West Banking Corp. President and CEO Antonio C. Moncupa said the COVID-19 pandemic remains a risk until its end is officially declared.
“We also have to consider the geopolitical tension as it affects global prices and affaffects our imports, our economy and our inflation,” he said at EastWest’s annual shareholders meeting also held on Friday.
Mr Moncupa said loan losses are expected to continue to fall, although the bank’s profits are unlikely to return to pre-pandemic levels in 2022.
The lender’s net profit in 2021 fell 30.8% to 4.5 billion pesos from a year earlier.
“Our earnings capacity should have increased significantlyIflittle this year and we should be back closer to 2019 income levels by 2023,” he said.
Meanwhile, Tan said recent economic reforms, such as passing laws amending the Retail Trade Liberalization Law, the Foreign Investment Law and the Civil Service Law, could open up opportunities for growth for the local banking sector.
“If they are well designed in terms of implementing rules, (laws) will help stimulate economic activity. And generally, increased economic activity helps the banking sector. So we expect it to benefit our customers and actually beneIfin the bank,” he said.
Tan hopes next administration will also prioritize policies that will deter cybercrime and strengthen regulation of non-banking activities Iffinancial service providers.
“We need to be tougher on cybercrimes, we need to make sure we do our part to prevent or deter perpetrators from committing cybercrimes,” he said.
While banks are heavily regulated, Tan noted that there has been a proliferation of non-bank financial service providers that fall outside the regulatory scope of financial supervision.
“So for the health of the industry and for public policy, they should be looking at how these entities should be managed versus the banks,” he said.
The collective net income of the Philippine banking sector jumped 44% to reach 223.66 billion pesos in 2021, compared to 155.22 billion pesos in 2020. — Luz Wendy T. Noble