Banking Industry Country Risk Assessment: Philippines

We use our BICRA economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. The anchor for banks operating only in the Philippines is 'bbb-'. The trend for economic risks faced by banks in the Philippines is stable, in our opinion. The banking sector is benefitting from stable macroeconomic and employment conditions. In our opinion, the sector's asset quality will stay broadly stable over the next two years. A moderate increase in NPLs from low-income and leveraged borrowers is likely due to higher interest rates and inflation. The sector's good capital position (15.2% Tier-1 ratio) and provisioning provide a cushion against any unexpected losses. Sectorwide profits will continue to benefit

...Banks in Philippines are exposed to high economic risks despite moderate private-sector debt in the economy. Low income levels and a weak legal framework for creditors in Philippines elevate credit risk for lenders. We see good growth prospects for the Philippine economy over the next couple of years. However, an uptick in the banking sector's nonperforming loan (NPL) ratio is likely because higher interest rates and inflation will affect low-income, leveraged borrowers. Credit costs should remain stable because banks have adequate provisioning buffers against a moderate rise in credit stress....

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