Tuesday, January 26, 2010

What's up with Philippine Banks?

Moody’s Investors Service has raised its outlook on the banking sectors of the Philippines and 11 other countries from “negative” to “stable,” citing improving domestic economies that could redound to the stability of banks.

Reasons for the upgrade were:

  • Improving local economic prospects and stabilizing global conditions,
  • Improving access to international debt and money markets,
  • Adequate resiliency of banks to cope with remaining macro-and micro-economic risks, having suffered only limited damage during the past 30 months of the financial crisis.

The likely increase in domestic consumption, boosted by rising remittances, would benefit the banking sector.

Higher consumption prompts businesses to increase production and invest, an activity that may spur bank lending. Increase in demand for loans may also push interest rates up, boosting the profitability of banks.

Moody’s expects the Philippine economy to grow 3 percent this year, faster than its projected one-percent expansion for 2009.