Philippine banks are some of the strongest in the region as local lenders continue to have a robust funding base and own strong domestic networks, two international credit watchers said in separate notes released on Monday.
In a report on Asean banks released on Monday, Moody’s Investors Service said while other Asean banking systems look for funding alternatives to finance rapidly increasing loan growth, the Philippines has ample funding cushions to ride the trend in the region.
In Moody’s assessment, Asean banks posted loan growth that steadily outpaced deposit inflows the past several years. This will lead other Asean banks to rely heavily on capital markets through bond sales to fund their lending operations.
This situation, however, is not likely seen prevalent in the Philippines because of its strong liquidity condition.
“Banks in the Philippines continue to have very strong funding cushions, and liquidity is unlikely to become a constraining factor for their credit profiles in the next few years,” Moody’s said.
The credit watcher added that loan growth was expected to continue to accelerate due to increased penetration of banking services.
Meanwhile, an industry report card released on Monday backed the sustained loan growth seen by Moody’s in the Philippines.
“Good economic conditions and ample liquidity continue to bolster loan growth and mildly improve non-performing loan ratios of Philippine banks,” Standard & Poor’s (S&P) said in its most recent assessment on Asean banks and Asean Financial Integration.
S&P said restricted access by so-called retail investors to the central bank’s special deposits account facility in 2013 boosted the Philippine’s deposits and provided banks a strong funding base to expand their lending this year.
The credit watcher also said Philippine banks “are playing defense and strengthening their domestic networks” in preparation for the Asean Banking Integration Framework.