Credit harder to come by as Philippine banks turn wary on loans

BANKS in the Philippines will become more selective on their lending, despite central bank efforts to cushion the economic blow from a banking slowdown, a recent report has predicted.

Maybank Kim Eng analysts warned that lenders are turning cautious on the back of expectations of a decline in asset quality, even though both banks and the economy are in a stronger position than during the Asian financial crisis in 1997.

To be sure, the Bangko Sentral ng Pilipinas plans to stimulate lending, such as by counting loans to small businesses towards reserve requirements, even as the Philippine government committed 51 billion pesos in wage subsidies for these smaller employers.

But corporate debt levels across various sectors "have been increasing the past few years which indicates shrinking room for more borrowing", the Maybank Kim Eng analysts added.

Loan growth is expected to come in at between 2 per cent and 3 per cent in 2020, before a rebound to 10 per cent in 2021, in tandem with the wider economic outlook.