Philippines top banks resilient despite tariff tensions – S&P

MANILA, Philippines — The country’s top banks remain on solid footing despite growing global uncertainties stemming from tariff tensions and geopolitical risks, according to S&P Global Ratings.

In its latest analysis, S&P said the top 10 Philippine banks are well capitalized, enjoy stable funding bases and are poised to weather external shocks owing to the Philippines’ domestically driven economy. These banks collectively hold 85 percent of total industry assets.

“Philippine banks’ credit quality will stay strong amid relatively benign economic conditions,” S&P said.

“Their strong capitalization and liquidity provide a buffer against unexpected risks,” the debt watcher said.

While the report acknowledged that indirect effects of global tariff disputes including slower global growth, currency volatility and weaker consumer confidence could weigh on bank earnings, the broader macroeconomic outlook for the Philippines remains favorable.

S&P projects the Philippine economy to grow faster than many of its regional peers, buoyed by robust domestic consumption and manageable inflation. It also forecasts strong credit growth, particularly in the retail segment, supported by lower unemployment and healthy demand for consumer loans.

Unsecured consumer loans such as credit cards and personal loans now make up nine percent of total bank lending, nearly double the five-percent level in 2019. These loans deliver higher yields, supporting profitability, but S&P warned that the rising share of riskier credit could lead to an uptick in nonperforming loans (NPLs) in the medium term.

Nonetheless, the asset quality of banks is seen to remain stable, with NPLs staying under six percent. Credit costs are projected at 0.7 to 0.8 percent of total loans, slightly above pre-pandemic levels but still lower than regional averages.

S&P also highlighted the relatively low debt levels of Philippine corporates and the low share of external borrowings, which should help shield borrowers from external rate shocks and currency depreciation.

Among individual lenders, BDO Unibank Inc., Metropolitan Bank & Trust Co. (Metrobank) and Bank of the Philippine Islands (BPI) stand out for their strong profitability, diversified loan portfolios and disciplined risk management.

Sy-led BDO, in particular, continues to lead the industry in assets, loans and deposits, while maintaining a low NPL ratio and high return on assets.

Meanwhile, midsize and state-owned banks face greater pressure from higher credit costs, weaker margins, and exposure to riskier loan segments. Union Bank of the Philippines and Security Bank Corp. were flagged for elevated credit provisions due to their larger shares of unsecured and unseasoned consumer loans.