12/11/2008
By Doris Dumlao
Philippine Daily Inquirer
US-based credit rating agency Moody’s Investor Service on Wednesday revised its credit rating outlook for the Philippine banking industry from “stable” to “negative,” saying the challenging global environment could dampen bank earnings and trigger a rise in loan delinquency.
A “negative” outlook signifies the credit rating may go down in the foreseeable future; a “stable” outlook means the rating will likely stay unchanged.
Moody’s said it would be difficult for banks in the Philippines to maintain an improving trend in asset quality under current conditions.
However, it also ruled out the ballooning of bad loans to levels seen earlier this decade, given the improved leverage and financial health of most local corporations.
Moody’s also gave a “negative” credit rating outlook for the banking systems of Australia, Hong Kong, Taiwan, Mongolia and Cambodia in its report, “Asian Banking System Outlook: An Update.”
“While the direct impact of the current global financial crisis on banks in Asia-Pacific has been comparatively limited, these changes in the industry outlook reflect expectations that gathering economic head winds from a global recession will increasingly test the resilience and strength of regional banking industries,” said Jerry Chien, managing director of Moody’s Financial Institutions Group in the Asia-Pacific.
During the Asian financial crisis that began in 1997, the banking system in the Philippines suffered from a wave of corporate defaults caused by sharp currency depreciation and interest hikes. The ratio of bad loans to total loans peaked at over 20 percent in 2002, driving banks to be cautious about extending new loans.
A cleanup of bad assets has been aided over the past few years by a Special Purpose Vehicle Law that waived some of the taxes and reduced fees usually collected in the sale or transfer of banks’ bad assets.
According to the latest central bank data, commercial banks had nonperforming loans (NPLs) representing 4.04 percent of their total loans at end-September.
On the macroeconomic front, the Moody’s report said that while the Philippines was less dependent on merchandise exports than some of its neighbors, it had less policy flexibility to cushion the impact of the global slowdown.
“Export demand, especially for its electronics, has already begun to decline and foreign investment has also decelerated this year,” it said.
“The intensification of the global recession could reduce overseas demand for Filipino workers and in some cases may mean layoffs and unemployment,” it added.
Moody’s expects overseas Filipino workers’ foreign exchange remittances—which have proven to be a key support for the national economy—to flatten, contrary to a BSP projection of sustained growth. It said there might even be downside risks in the event of a global disintegration.
Moody’s maintained its “positive” outlook—likely to go up—on credit ratings of individual Philippine banks’ foreign currency deposit ratings, reflecting the “positive” outlook on the country’s sovereign credit rating.
Last January, Moody’s raised its sovereign rating outlook for the Philippines to “positive” from “stable,” citing the government’s headway in stabilizing its fiscal position and in reducing its reliance on external financing.
A “negative” outlook signifies the credit rating may go down in the foreseeable future; a “stable” outlook means the rating will likely stay unchanged.
Moody’s said it would be difficult for banks in the Philippines to maintain an improving trend in asset quality under current conditions.
However, it also ruled out the ballooning of bad loans to levels seen earlier this decade, given the improved leverage and financial health of most local corporations.
Moody’s also gave a “negative” credit rating outlook for the banking systems of Australia, Hong Kong, Taiwan, Mongolia and Cambodia in its report, “Asian Banking System Outlook: An Update.”
“While the direct impact of the current global financial crisis on banks in Asia-Pacific has been comparatively limited, these changes in the industry outlook reflect expectations that gathering economic head winds from a global recession will increasingly test the resilience and strength of regional banking industries,” said Jerry Chien, managing director of Moody’s Financial Institutions Group in the Asia-Pacific.
During the Asian financial crisis that began in 1997, the banking system in the Philippines suffered from a wave of corporate defaults caused by sharp currency depreciation and interest hikes. The ratio of bad loans to total loans peaked at over 20 percent in 2002, driving banks to be cautious about extending new loans.
A cleanup of bad assets has been aided over the past few years by a Special Purpose Vehicle Law that waived some of the taxes and reduced fees usually collected in the sale or transfer of banks’ bad assets.
According to the latest central bank data, commercial banks had nonperforming loans (NPLs) representing 4.04 percent of their total loans at end-September.
On the macroeconomic front, the Moody’s report said that while the Philippines was less dependent on merchandise exports than some of its neighbors, it had less policy flexibility to cushion the impact of the global slowdown.
“Export demand, especially for its electronics, has already begun to decline and foreign investment has also decelerated this year,” it said.
“The intensification of the global recession could reduce overseas demand for Filipino workers and in some cases may mean layoffs and unemployment,” it added.
Moody’s expects overseas Filipino workers’ foreign exchange remittances—which have proven to be a key support for the national economy—to flatten, contrary to a BSP projection of sustained growth. It said there might even be downside risks in the event of a global disintegration.
Moody’s maintained its “positive” outlook—likely to go up—on credit ratings of individual Philippine banks’ foreign currency deposit ratings, reflecting the “positive” outlook on the country’s sovereign credit rating.
Last January, Moody’s raised its sovereign rating outlook for the Philippines to “positive” from “stable,” citing the government’s headway in stabilizing its fiscal position and in reducing its reliance on external financing.
1 comment:
Socheata, you dumbass, don't leave out the context when headlining an article. This is pure demagoguery.
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