banks in the Philippines

3 Philippine banks get negative outlook over pandemic woes

Ralf Rivas

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S&P and Fitch cut their outlooks for 3 banks, as the coronavirus pandemic results in 'higher than expected credit losses'

Three major Philippine banks were placed under negative watch by credit raters on Tuesday, October 13, as the prolonged coronavirus pandemic results in “higher than expected” losses.

S&P Global Ratings revised its outlooks for the Bank of the Philippine Islands (BPI) and Security Bank to negative from stable.

“We see at least one-in-three chance that economic risks facing the Philippine banking industry could increase over the next 6 to 24 months,” S&P said.

Meanwhile, China Banking Corporation (China Bank) saw its outlook trimmed to negative by Fitch Ratings, as the country takes a “severe blow from the coronavirus pandemic.”

All 3 banks, however, maintained their respective credit ratings. But a negative outlook means that the banks may get a downgrade, which would result in higher borrowing costs and tighter lending standards.

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Fitch noted that the Philippines’ economic contraction by 9% in the 1st half of the year is “the worst in Southeast Asia.” (READ: [ANALYSIS] End of growth: How the pandemic ruined PH economy beyond recognition)

“We expect it to shrink 8% for the full year. We forecast economic growth to rebound to 9% in 2021, but this is in part reflects a low base effect,” Fitch said.

S&P said the deep recession may impair banks’ asset quality, capitalization, and profitability.

BPI’s earnings in the 1st half of 2020 plunged by 15% to P11.7 billion from the P13.7 billion it earned during the same period in 2019. It booked P15 billion for loan losses in the 1st semester, which is 4 times more than in the same period last year.

Interestingly, both Security Bank and China Bank saw their earnings rise in the 1st semester despite higher loan loss buffers.

China Bank said its net income grew by 24% to P5.2 billion in the 1st half, while Security Bank saw its profits rise by 14% to P5.7 billion.

As of Monday, October 12, the Philippines ranks 18th in the world in terms of total number of COVID-19 cases. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.