War relief may dent PH bank profits–S&P
Regulatory relief announced by the Bangko Sentral ng Pilipinas (BSP) to help banks and borrowers cope with the economic fallout of the oil shock could prove a double-edged sword for lenders, S&P Global Ratings said, though the overall impact should remain manageable for the industry.
In a note to clients, S&P said the measures may weigh on lenders’ profitability and also help prevent a sharp rise in bad loans.
The relief package includes temporary grace periods of up to six months for loan payments of affected borrowers and the deferment of agricultural loan payments for up to one year, subject to banks’ assessment.
Loans to affected borrowers may also be excluded from past-due and nonperforming classifications for up to a year.
The central bank said the measures support President Marcos’ declaration of a national energy emergency in response to the oil price shock.
The regulator also said it “strongly” urges financial institutions to temporarily suspend fees and charges imposed on the use of online banking platforms or electronic money services, including transactions via Instapay or PesoNet, to help ensure continued access to banking services during the energy emergency.
“Suspension of loan repayments could reduce interest income. These factors will weigh on the profitability outlook for the next one to two years,” S&P said. “But it could avoid a spike in nonperforming loans.
BSP Governor Eli Remolona Jr. first signaled the plan to offer relief after the Monetary Board’s surprise policy meeting on March 26, when the central bank kept its benchmark interest rate at 4.25 percent despite rising price pressures.
In February, before the conflict in the Middle East roiled energy markets, bank loans overdue by at least 90 days accounted for 3.33 percent of the banking sector’s total lending portfolio, a six-month high.
Even so, banks trimmed their buffers against unpaid loans, setting aside P519.5 billion in allowances for credit losses, equivalent to a coverage ratio of 93.83 percent, the lowest since November 2024.
S&P said that Philippine banks have no significant direct exposure to the Middle East, with less than 5 percent of lending tied to the corporate sectors most affected by the conflict—airlines, oil refining, chemicals and agriculture. Still, it warned that lenders could face “second-order impacts” as higher oil prices strain retail borrowers’ cash flows.
