Philippine banks face a brighter outlook in 2016, compared with other lenders in the region, amid the slowdown in Chinese economy and expected interest rate hike in the United States, global debt watcher Fitch Ratings said in a report Wednesday.
Fitch said in its 2016 Outlook Report that Philippine banks were enjoying a positive outlook, better than mostly stable outlook for other banking regimes in the region.
“With respect to the outlook on ratings, we have a stable outlook on the overwhelming majority except Mongolia and the Philippines [negative and positive, respectively],” Fitch said.
“Banking sectors within the Asia-Pacific region are likely to face a more challenging year ahead as financial systems adjust to slowing growth in China and the prospect of higher US interest rates,” Fitch said.
The London-based credit rating agency said earnings and capital buffers built up in recent years meant that most banking systems start from a position of strength going into the weaker economic backdrop next year.
“We have a higher proportion of banking systems on negative sector outlooks for 2016 than was the case in 2015. This is driven by the prospect of deteriorating asset quality, a more cautious risk appetite from most banks contributing to weaker credit growth, and margin pressures—all of which is likely to lead to slower profit growth,” it said.
Fitch said it expected the growth of China’s economy to slow down to 6.3 percent in 2016 and 6 percent in 2017. The US interest rates would increase gradually in 2016, it said.
Fitch said in an earlier report Philippine banks—with robust domestic demand, resilient external liquidity flows and low private external debt—were better positioned to face the macroeconomic challenges than other Asean banking systems.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., however, said local lenders should continue finding ways on how to further strengthen their positions amid the influx of foreign banks taking advantage of the more liberalized banking industry.
Another major global debt watcher, Moody’s Investors Service, also gave Philippine banks a positive outlook.
