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Research and Markets: Despite The Philippine Banking Sector Strengthening Considerably Over the Past Decade, Profitability Has Remained Constrained, S
Thursday April 2, 03:26 AM
Research and Markets(http://www.researchandmarkets.com/research/beca3f/philippines_commer)
has announced the addition of the "Philippines
Commercial Banking Report Q1 2009" report to their offering.
The Philippines Commercial Banking Report provides independent forecasts
and competitive intelligence on Philippines's commercial banking
industry.
Although real GDP growth in the Philippines accelerated to 4.6%
year-on-year (y-o-y) in Q308, up from 4.4% in the previous three-month
period, we retain our downbeat view of the Philippine economy. Risks to
our current 4.3% growth forecast for 2009 remain firmly weighted on the
downside as domestic demand weakens further amid slowing remittances and
increased economic uncertainty, and the performance of net exports
remains lacklustre.
Despite the Philippine banking sector strengthening considerably over
the past decade, profitability has remained constrained, largely due to
the inherent risk-averse nature of domestic banks. Yet with asset
quality improving and macroeconomic fundamentals strengthening, not to
mention the sector remaining fragmented, there are many reasons to
retain a positive medium- to long-term view of the industry. Over the
near term, however, although the sector remains relatively shielded from
the ongoing global financial turmoil, profitability is likely to
continue to suffer.
This report is being written at a time when the global financial crisis,
which arose as a result of the evaporation of inter-bank liquidity, has
moved into a new phase. Stock market participants appear, reasonably, to
have taken the view that the policy responses taken by governments,
central banks and multi-lateral institutions will be sufficient to
prevent a total collapse of the global financial system. Instead, stock
market participants are focusing on the impact of a near-global
recession on the earnings of non-financial companies.
The number and size of stand-by facilities agreed by the IMF since early
October supports our view that, of the emerging markets whose commercial
banking sectors were surveyed, the countries of Central and Eastern
Europe are those whose economies are most at risk of suffering adverse
affects as a result of the global financial crisis. This is partly
because the macroeconomic imbalances are relatively severe and partly
because the Central and Eastern European countries are more directly
affected by the brutal recession that is unfolding in wealthier member
states of the EU.
As yet, it has not been possible to collate hard numbers, for most of
the countries whose commercial banking sectors were surveyed, that
clearly quantify the impact of the global financial crisis on the banks.
As we explain in the section that discusses changes that we are making
to the report, we again include a lengthy essay which attempts to
identify the key issues. In essence, in the emerging markets - and,
indeed, the developed countries - of the Asia-Pacific, commercial banks
appear well placed to deal with the crisis. The same is, broadly, true
of commercial banks in the various countries of the Middle East and
North Africa. Latin America, Chile, Brazil, Mexico and Colombia appear
better placed than Argentina, Venezuela, Bolivia and Ecuador. South
Africa's situation appears to have much in common with that of Brazil.
In contrast, Nigeria faces some of the same challenges as those that
confront Venezuela. The positions of most countries in Central and
Eastern Europe, however, are alarming.
From Q2 09, we will include data that pertains to late 2008 and extend
forecasts out to 2013. We will also incorporate much greater discussion
of the various protagonists in each country's commercial banking sector
and a number of new features. We believe that the figures we compiled in
mid-2008 provide insights as to how the various commercial banking
sectors will fare in the current, extremely uncertain, climate. We have,
therefore, left them essentially unchanged.
The figures on the tables above provide a snapshot of the banking sector
in the Philippines prior to the onset of the global financial crisis. To
place the figures in context, it may be useful to bear in mind certain
aspects of the 59 countries whose banking sectors are currently been
surveyed. Across this sample, the median growth in assets in local
currency terms was 21.3% (in Colombia), the median loan growth was 21.6%
(in India) and the median growth in deposits was 17.9% (in Brazil). On
their own, the ratios of loans to deposits, assets and GDP mean little.
However, they can provide useful hints when combined with other data.
Across the 59 countries, the median loan/deposit ratio is 92.3% (in
Greece), the median loan/asset ratio is 56.0% (in Poland) and the median
loan/GDP ratio was 63.9% in India.
As in previous reports, we include a SWOT analysis for the Philippines.
We suggest that the two most important strengths are the relative
openness of the market for banking services, and the ongoing high level
of overseas remittances which will remain important even if reduced.
Against this there is the inherently risk-averse nature of domestic
lenders, which can only be compounded by global shortages of credit.
Since Q108, we have calculated, on a consistent basis, a Commercial Bank
Business Environment Rating (CBBER) for each of the 59 countries
surveyed. The CBBER includes an assessment of the limits of potential
returns. It does this by taking into account the size, growth potential
and bancassurance potential of the banking sector, as well as aspects of
the economy in 2007. The CBBER also depends on an assessment of the
risks to the realisation of potential returns. This reflects the
assessments of overall country risk, together with the regulatory and
competitive environment. CBBER for Philippines overall CBBER is 48.1.
The Philippines has the third-lowest CBBER of all the Asia Pacific
countries surveyed, only rating above Bangladesh and Sri Lanka.
For more information visit http://www.researchandmarkets.com/research/beca3f/philippines_commer
Contact:Research and MarketsLaura WoodSenior Managerpress@researchandmarkets.comFax
from USA: 646-607-1907Fax from rest of the world: +353-1-481-1716
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