Philippine banks will remain financially stable thanks to a growing local economy and relatively low asset quality risk, Fitch Ratings said Wednesday.
The London-based ratings agency expects the Philippine economy to rise 5 percent to 6 percent in 2011-2012. Given this " satisfactory economic backdrop," Fitch said Philippine banks can expand their lending and fee-based activities this year.
Fitch also sees asset quality to remain intact as corporations, which account for the bulk of bank loans, can cope with higher prices and funding costs in view of their modest leverage.
Fitch notes that the domestic banking industry still needs to resolve its structural issues including low coverage on foreclosed properties and deferred charges, and the operational challenges in an emerging market.
Fitch also expects its rated Philippine banks to maintain satisfactory capitalization and liquid balance sheets. The core Tier 1 capital adequacy ratio rose to an average 12 percent at end- 2010 compared with 11 percent in 2009. The average loans/deposits ratio was stable at about 60 percent.