Philippine banks seen to withstand slowdown

The lender’s non-performing loan ratio was only 3.2% as of June as they continued to trim their soured loans and give out more loans.

Philippines banks will weather a global slowdown as they are in a better shape now after surviving the financial crises of 1997 and 2008, officials said.

“Philippine banks are in a much better shape [now] with a stronger capital base than a few years back,” said Eduardo V. Francisco, BDO Capital & Investment Corp. president.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr., in a text message, also highlighted banks’ more-than-adequate capitalization, adding “market risk exposures are well-managed.”

Central bank data showed that Philippine banks’ capital adequacy ratio was 16% on solo basis and 17% on consolidated basis as of December, exceeding the BSP’s 10% and the Bank for International Settlements’ 8% requirements.

Their non-performing loan ratio, or the ratio of their bad loans to total loans, was only 3.2% as of June as they continued to trim their soured loans and give out more loans. Their NPL ratio, counting in interbank lending, peaked at 17.6% in the first half of 2002, or in the wake of the 1997 Asian financial crisis.

The global economy is projected to grow at a slower pace this year, with the advanced economies expected to slump. The International Monetary Fund in the World Economic Outlook published in September said world output is now projected to grow by 4% this year and the next, instead of the 4.3% for 2011 and 4.5% for 2012 forecast in June.

The world might tip into another recession, however, if Europe fails to stamp out a sovereign debt crisis and the US fails to stimulate its ailing economy, the world’s largest.

View the full story in Business World.