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By Luz Wendy T. Noble, Reporter
EMERGING MARKETS such as the Philippines will continue to face credit risks this year, as the central bank is likely to lift regulatory relief measures and the loan repayment moratorium expires. S&P Global Ratings said.
At the same time, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said that they are still investigating asset quality developments to assess when to lift relief measures implemented at the height of the lockdown last year.
“Bad loans (bad loans) and restructured loans will continue to rise over the next few quarters as the true impact of COVID-19 (coronavirus disease 2019) unfolds on bank borrowers,” Nikita Anand, analyst at S&P Global Ratings. he said in an email.
“We believe that the delinquency rate could rise further to around 6% -6.5% by the end of 2021,” he added. The Global Debt Observer projects that the ratio may have increased by 4-5% in 2020 from the 2019 level.
Ms Anand warned that a “sharp increase” in bad loans may occur after the second debt moratorium as provided in Republic Law 11494 or the Bayanihan Recover As Once Act that expired on December 31. 2020.
The delinquency rate for the Philippine banking industry reached 3.81% at the end of November, compared to 3.72% in October and 2.19% a year earlier, according to BSP data. Bad loans increased 73.6% to P404,687 million in November from P233,064 million a year ago.
The restructured loan ratio also increased to 1.31% of total loans at the end of November from 0.38% a year earlier. These loans shot up 241% to P139,614 billion from P40,857 billion a year ago.
S&P warned in a note that bad loans will rise further once regulatory relief measures employed by central banks in developing markets are lifted.
Ms Fonacier said “they are still monitoring developments in asset quality.”
“Therefore, we are not yet able to determine the timeline for lifting the regulatory relief at this time,” he said in a Viber message.
BSP Governor Benjamin E. Diokno said they will carefully assess the timing of the relief measures to ensure they do not cause risk or instability to the to beFinance system.
The central bank said the bad loan ratio could have reached 4.6% by the end of 2020. It peaked at 17.6% in 2002 as a result of the Asian financial crisis.
Meanwhile, Anand said the launch of the COVID-19 vaccines will be used to assess the economic and credit risks of sovereigns.
“Widespread immunization, which some countries could achieve by the middle of the year, will help pave the way for a return to more normal levels of social and economic activity,” he said. “The improvement in the quality of the assets will depend on the economic recovery and the stabilization of credit conditions.”
Ms. Fonacier from BSP said the country’s vaccination program is a positive development, noting its “positive impact on business confidence.”
The BSP Banking Sector Outlook Survey released earlier this month showed that most of the banks surveyed expect the NPL ratio to exceed 3% by 2022, while almost half of banks consider restructured loans to comprise between 3% and 5% of your loan portfolio.
This uncertainty has led to a decline in bank credit growth, which stood at 0.3% in November, the slowest since 1.9% in September 2006.
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