With higher loan growth and lower credit provisioning, profitability of local banks is seen to remain stable.
Expanded loans and reduced credit provisioning are factors considered by Fitch Ratings to counter the impact of lower margins and lack of extraordinary trading gains.
“We expect the deterioration in reported asset-quality metrics to accelerate in 2021 as debt moratoria mandated by regulations expire in December 2020, though the impact on profitability is likely to be cushioned by the banks’ pre-emptive general provisioning in the preceding year,” the debt rater said.
The debt moratorium referred to pertains to the 60-day, one-time leeway mandated under Republic Act No. 11494, otherwise known as the Bayanihan to Recover as One Act.
The Bangko Sentral ng Piliipinas (BSP) has issued a memorandum requiring all covered institutions to apply the grace period for existing loans, current and outstanding, “falling due, or any part thereof, on or before December 31, 2020”.
The report projects the effective implementation of the proposed Financial Institution Strategic Transfer (FIST) Act to aid banks on their impaired loans.