According to Lehman Bros., an expected downturn in industrial production and negative business sentiments would be the major factors affecting the rise in NPLs coupled with a decline in confidence from the foreign and domestic investors.
The report, penned by Patrick Pang, took note of the experience of some of the most respected banks in the Philippines, notably the Bank of the Philippine Islands (BPI) and Metrobank.
"Most banks’ NPL ration increased by two to three percentage points. In the case of Metrobank and BPI, the increase was largely attributable to acquisitions earlier in the year (BPI acquired Far East Bank and Trust Corp., and Metrobank swallowed Solid Bank)," Pang said.
The Lehman analyst said that while Equitable PCI Bank reported a 170-basis point (bps) decline in NPLs, such decline was due to the workout of a couple of larger accounts in September and that NPLs are moving towards the 13-percent level.
The same report forecasts that loan growth "will remain in the single digit level" for most of the year.
Lehman Bros said that it expects loan growth to weaken in the first quarter of 2001 primarily dictated by the worsening political crisis which, in turn, was triggered high interest rates and higher NPLs.
"We forecast loan growth at 3.5 percent in 2000 and six percent in 2001," the report stated.