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S&P: Bank lending to grow 5-8% in 2021

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S&P: Bank lending to grow 5-8% in 2021

Bank lending in the Philippines could rebound and expand by as much as 8 percent this year if the government speeds up the implementation of its infrastructure projects, S&P Global Ratings projected on Wednesday.

In a webinar on Wednesday, S&P credit analyst Nikita Anand said the New York-based debt watcher expected bank lending to surge to 5 to 8 percent in 2021 after dipping by almost 1 percent the year before.

“There were some early signs of improvement in the last couple of months,” Anand noted.

“Month-on-month, there was a growth in total loans compared to several continuous months of contraction prior to that.”

Bank lending dropped by 2.4 percent in January, faster than December’s 0.7-percent slide and a reversal of November’s 0.5-percent growth. The latest fall was the quickest in more than 14 years, or since August 2006’s 2.9-percent dip.

According to the analyst, downside risks to credit expansion would still come from the banking industry while the public sector would exert upside pressures.

“Banks will remain cautious and asset quality preservation will be a priority… simply because the economic outlook is still a bit uncertain,” Anand said.

“A lot would depend on the Covid vaccinations. [These would] be the key to [increasing] domestic consumption [and] economic activity,” she added.

“We also think that, for growth to actually [hit] the higher end of this projection… it requires ramping up key infrastructure projects. Otherwise it’s probably going to [land] at the lower end of [the] projection.”

Of this year’s P4.50-trillion national budget, P1.1 trillion or 5.4 percent of the country’s gross domestic product (GDP) was allotted for the government’s Build, Build, Build infrastructure program.

The webinar comes after S&P released its report on the Philippine banking industry recently.

In the report, it said local lenders were “on a long road to recovery,” with the nonperforming loans (NPL) ratio expected to rise in the first quarter as loan moratoriums and fiscal support expire.

The credit rating agency projected this ratio to pick up to 6 percent this year from 3.6 percent at end-2020.

The debt watcher also said consumer and micro, small and medium portfolios would still see high new NPL formation, as many small businesses had to close and revenues plunged on account of the lockdowns the government imposed to contain the coronavirus pandemic.

Household incomes, meanwhile, have been reduced because of job losses and salary cuts.