MANILA, Philippines – Bank executives see stability in the country’s economy and banking system over the next two years, according to the first Banking Sector Outlook Survey (BSOS) of the Bangko Sentral ng Pilipinas (BSP).

The report said that 6 in 10 bank executives or 66.7% see a stable banking system, while 3 in 10 or 33.3% project a stronger banking industry over the next two years.

“The stable outlook for the banking system can be attributed to the strong macroeconomic fundamentals, adequate liquidity, and rising capital buffers of banks,” the BSP report said.

The survey results also revealed that most bank presidents and chief executive officers (CEOs) projected the country’s gross domestic product (GDP) to grow between 5% to 7%. (READ: Philippine economy slows down to 6% in Q2 2018)

Respondents also said that they expect assets, total loan portfolio and earnings to grow between 10% to 20% over the next two years as well. 

They also see net interest, return on equity, non-performing loans, and leverage ratios to be below 10%, and  risk-based capital adequacy ratio between 10% to 20%.

Fintech as business strategy

The survey, which covered 114 major banks, also revealed the eagerness of top executives in adopting financial technology (fintech) as part of their business strategy.

Majority or 71.1% of them said they want to use technology-enabled solutions as they seek to gain new customers.

“Most of the respondents believe that growing their banks and optimizing the use of technology are strategic priorities to succeed in the business,” the BSP said.

The respondents said that fintech will improve customer experience and result to a broader client base.

Banks also reported that they want to grow, optimize available technology, and protect the business, as fintech would enhance data and cybersecurity, uphold consumer protection, and boost capital and liquidity ratios.

Concerns 

Most banks complained that they find it challenging to comply with Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009 and allocate loans for micro, small, and medium enterprises (MSME).

RA 10000 requires all banks to allocate at least 10% of their total loan portfolio to agrarian reform and 15% to agriculture to increase market efficiency and promote the modernization of the agricultural sector. (READ: Agriculture department blames banks for poor growth)

Local banks allocate only around 1% for agrarian reform, while around 12% was allocated for agriculture in 2017.

The law imposes monetary and non-monetary sanctions to non-compliant banks.

Banks previously said that they would rather pay the hefty fines than give loans to “high-risk” farmers and small businesses.

Overall, the BSP said that the bullish outlook “implies that banks will continue to support the sustained development of the national economy.” – Rappler.com