PHILIPPINE BANK systerm it remains stable as its own a stable Profability, funding and liquidity, and a strong cash position can help mitigate potential asset quality risks from rising retail loans and economic downturns from continued growth. corruption investigate, Moody’s Mousehe said.
“We maintain a stable outlook on the Philippines’ banking system (Baa2 stable), supported by a stable operating environment and adequate loan loss limits,” Moody’s. The estimates were mentioned in a report on Monday.
The stable outlook means the credit watcher’s assessment of local rated lenders is unlikely to change over the next 12 to 18 months.
Moody’s currently rates eight commercial banks in the country, namely BDO Unibank, Inc., Metropolitan Bank and Trust Co., Bank of the Philippine Islands, China Banking Corp., Rizal Commercial Banking Corp., Philippine National Bank, Union Bank of the Philippines, and Security Bank Corp.
These lenders hold about 66% of the sector’s total assets as of the end of September 2025.
Of these eight, only Security Bank has a negative outlook from Moody’s.
The credit watcher noted that weak investor sentiment caused by flood control poses a risk to the industry, especially in potential payouts. delays in the construction sector.
This, along with higher borrowing costs, could damage the industry’s asset quality, Moody’s said.
Late last year, several lawmakers, Public Works offprivate contractors and independent contractors have been embroiled in corruption allegations related to monumental flood control projects across the country.
“Unsecured products have had a big impact on mortgages, so the cost of borrowing will rise as these times of the year,” said Moody’s.
“At the same time, ongoing investigations are likely to delay payments in the construction and related industries, which will affect the ability to repay borrowers in these areas.”
However, Moody’s said the expected economic recovery and further easing by the Bangko Sentral ng Pilipinas (BSP) may provide some relief to Philippine banks.
By 2026, Moody’s sees the country’s gross domestic product (GDP) growing by 5.5% due to strong domestic consumption, continued income from overseas Filipinos, improving public investment and ongoing reforms.
If possible, this year’s GDP growth will increase from a five-year low of 4.4% in 2025 and will reach the middle of the government’s target of 5%-6% for the year.
The BSP has so far lowered borrowing costs by a total of 200 points (bps) from August 2024, bringing the key policy rate to 4.5%.
In 2025 alone, it delivered five straight 25-bp cuts, the last two fueled by consumer and business uncertainty due to flood control collapses.
BSP Governor Eli M. Remolona, Jr. left the door open for another cut in their Feb. meeting. 19 if the slowdown in fourth-quarter growth proves to be demand-driven.
“However, a more accommodative monetary policy environment will help support private consumption and ease the debt servicing costs of some borrowers,” Moody’s said.
Moody’s similarly expects Philippine banks to maintain strong liquidity as domestic money production matches spending.
However, it sees loan growth slowing to between 8% and 9% over the next 12 to 18 months.
Bank lending has posted a double-digit expansion for nearly two years, starting in May 2024, based on BSP data.
Meanwhile, Moody’s said the industry could continue to benefit as broad-based gains as higher-yielding retail loans offset the impact of rising prices. offers and low interest rates.
Local bank funding and deficits are likely to freeze this year, the credit watchdog noted.
“Banks maintain a healthy loan-to-deposit ratio, indicating that there is sufficient capital to support credit demand,” Moody’s said. “On time the rise of the long-tenor fi projectfunding presents funding risks from maturity volatility, Philippine banks have consistently maintained a relatively stable funding ratio, a trend we expect to continue.”
“Strong liquidity positions, particularly in cash and government securities, will also remain stable and helpful. to address short-term funding gaps,” it added. – Katherine K. Chan
