Philippine banks seen to cut earnings this year

MANILA, Philippines - Philippine lenders are expected to incur weaker earnings this year as credit tightens and as trading losses mount, the Bangko Sentral ng Pilipinas (BSP) said. Banks’ profitability will be “dented, especially from trading losses," BSP Governor Amando M. Tetangco Jr. said, referring to banks’ practice of buying and selling government securities. Lending growth is also seen to fall as the global crisis deepens, cutting demand for goods and services and increasing banks’ risk avoidance. Last year, the banking industry exceeded expectations, posting a 24 percent lending growth in September last year, driven by demand from wholesale and retail trading, transportation, storage, and communications. The figure beat the central bank’s estimates who earlier predicted that lending activity will rise by 10 percent in 2008. But this year, the crisis’ effects will become more pronounced, explaining the central banks’ move to cut interest rates, which has the effect of making credit more available to businesses. Despite these drawbacks, Tetangco expressed optimism that lending expansion will be sustained, supported by “steady remittances" and “lower prices of goods." These “would continue to buoy consumption and thereby provide support to credit growth," he said. - GMANews.TV