Will Philippine banks’ loan growth slowly grind to a halt?

It has gradually moderated since 2014.

The Southeast Asian nation’s banks have been basking in robust loan growth for a couple of years now, but doubts have been mounting since it has been slowly taking a more leisurely pace.

According to a report from Moody’s Investors Service, their analysts are expecting a credit expansion of around 14%-16% over the outlook horizon, a slight dip from 2014’s 19%.

However, Moody’s said increases in property prices remain in line with GDP growth, and that the country can support a relatively fast pace of loan growth in under-penetrated sectors without causing excessive asset risks.

“Loan growth has moderated but will remain brisk,” the report said.

Meanwhile, Moody’s added that the rates of new NPL formation will continue to be subdued.

“We expect credit costs to rise slightly as banks increase the proportion of lending to high-yielding segments such as the consumer sector, but leading indicators of asset quality are stable,” the report said.

As the proportion of loans increases to underserviced segments, Moody’s says it would consequently decrease total loans to the competitive large corporate segment, leading to a widening in net interest margins and fostering profitability.