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Banking system to stay strong amid pandemic

The country’s banking system is expected to keep its footing amid the pandemic as the domestic financial system remains in a strong position, Bangko Sentral Gov. Benjamin Diokno said.

While the full impact of the pandemic continues to unfold, domestic financing institutions remain resilient, Diokno said in his speech during the Financial Executives Institute of the Philippines 2021 inaugural meeting and induction ceremony.

“The financial system is in a strong position to both weather the significant economic effect caused by the Covid-19 pandemic and support the country’s economic recovery,” he said.

Citing the results of the latest Banking Sector Outlook Survey, he noted that 68.8 percent of the respondent-banks expect the domestic banking system to remain stable in the next two years.

This expectation was based on, among others, the projected recovery of the domestic economy this year to a level that is not less than six percent to 6.3 percent; a 10 percent to 15 percent growth projection in the loan portfolio in the next two years; and projected growth in financial assets of not more than 10 percent.

He said respondent banks also expect double-digit growth in deposits in the near term.

Banks expect non-performing loans to surpass three percent this year and next because of the pandemic, while some expect the ratio of restructured loans to total loans to hit more than three percent to five percent, the BSP chief said.

“The banks retained their upbeat expectations on returns as 71 percent of the respondents for the second semester of 2020 forecast double-digit net income growth for the next two years,” he added.

The strength of the domestic banking system was traced to continued regulatory enhancements targeted to ensure that banks have significant capital and liquidity buffers.

Diokno noted that favorable banking conditions in recent years have also solidified the strength of the financial system.

“Likewise, the result of our stress tests suggest that banks can continue to lend and prosper through a broad range of adverse scenarios,” he said.