Philippine banks’ property exposure a rating risk — S&P

Bank ratings across the world will likely stay resilient amid a coronavirus-induced economic crisis, according to S&P Global Ratings.

But risks remain elevated for financial institutions including Philippine banks’ growing exposure to the local property sector, it said in a report on Friday.

S&P said the credit profiles of most rated banks would likely stay resilient with just 30% of the banks globally bearing a negative outlook, including those in the Philippines.

The credit rater said the robust capital and liquidity position of banks before the pandemic hit and improved regulations would help them remain resilient.

Relief measures for the sector during the global health crisis, state support to households and the private sector that helped them cope with income losses and the projected 5% rebound in global economic output this year should also help, it added.

“Should the spillover effects on banks from the pandemic be worse or longer lasting than we forecast, we may revise the central scenario that currently underpins our ratings, which could lead to downgrades,” S&P said.

In the Philippines, banks’ high exposure to the real estate sector was a risk to their negative outlook, it said.

“The real estate sector is another potential source of risk for emerging market banks, as in developed markets,” it said.

“Pre-COVID-19 oversupply in China, Thailand and Malaysia exacerbate the risks, while significant exposures in the Philippines and South Africa — and growing exposure in Turkey as retail clients turn to durable goods in the context of a depreciating lira — similarly worsen the situation,” it added. — Beatrice M. Laforga