‘Philippines banks more resilient than regional peers’

Amid tariff uncertainty

MANILA, Philippines — Philippine banks are poised to weather the looming economic headwinds better than their Association of Southeast Asian Nations (ASEAN) counterparts despite heightened tariff threats that could dampen growth prospects across the region, according to global debt watcher Fitch Ratings.

Speaking in the latest episode of Money Talks, Jonathan Cornish, Fitch’s head of Asia-Pacific Bank Ratings, said that while the imposition of tariffs could weigh on the banking systems across Southeast Asia, Philippine banks are expected to show relative resilience.

“The imposition of tariffs will likely be negative for the region, potentially more so for the likes of Vietnam and Thailand than for the Philippines,” Cornish said.

“We view the Philippine banking system as exhibiting a degree of resilience and stability in terms of growth prospects,” he said.

Although delays in tariff implementation provide temporary breathing space, Cornish warned that lingering uncertainty could deter business investment across ASEAN, potentially slowing economic growth and impacting banks’ performance.

Nevertheless, Fitch believes that these risks remain manageable for Philippine banks, aligning with their current “neutral” sector outlook.

“We view the system’s prospects for business generation and financial performance to be broadly similar in 2025 versus last year,” Cornish added.

He also said that the Philippines stands in contrast to neighboring Vietnam, where Fitch recently noted sector improvements.

However, Cornish cautioned that Vietnam’s positive momentum could be threatened if high tariffs are imposed, prompting a possible reversion to a neutral outlook.

Thailand, on the other hand, faces a higher risk of its banking sector outlook deteriorating from neutral to negative.

The country’s relatively low exposure to the United States market also shields it from potential trade shocks. While Vietnam’s exports to the US account for a significant share of its gross domestic product, the Philippines’ US exports remain at low single digits as a percentage of GDP.

“The Philippine economy and banking system should remain relatively stable if the tariff levels remain low after bilateral negotiations,” Cornish said.

Further supporting the local banking system’s stability, Cornish pointed out that recent Fitch rating actions on major Philippine banks were positive, with upgrades in their viability ratings (VRs), a measure of standalone creditworthiness. The credit outlook for these banks remains stable.

According to Cornish, the Bangko Sentral ng Pilipinas (BSP)’s role in supporting credit expansion and maintaining financial system stability is crucial.

“The authorities, including the BSP, have presided over relatively robust credit growth in recent years,” he said, adding that this trend is expected to continue as the economy maintains its momentum.

With policy rate cuts likely in 2025 and 2026, Fitch expects sustained loan demand, further bolstering bank lending activities.

Cornish also noted that past rate cuts have not significantly eroded the net interest margins (NIMs) of Philippine banks, thanks to their lending strategies focused on high-yielding loan segments.

“We expect NIMs of major commercial banks to narrow slightly, but this will be offset by double-digit total loan growth. Overall, bank earnings should hold up well in the Philippines,” he added.

The BSP trimmed its key interest rate by 25 basis points to 5.50 percent on April 10, bringing the total rate cuts to 100 bps so far this cycle. The Monetary Board’s next policy review is scheduled on June 19.