Banks brace for Mideast war fallout–Moody’s
Philippine banks could face pressure from the ongoing war in the Middle East, which could stoke anti-inflation rate hikes that may slow lending and strain borrowers’ ability to make timely payments as higher oil prices squeeze household budgets, Moody’s Ratings said.
Speaking at a news briefing on Tuesday, Moody’s analyst Chong Jun Wong said local lenders could feel a “second-order” impact from the conflict, with potential effects on loan growth and asset quality.
Wong noted that higher inflation could weigh on the repayment capacity of retail borrowers, including overseas Filipino workers in the Middle East who may be displaced by the fighting.
That said, Moody’s expects loan growth this year to slow to 8 to 9 percent, down from the double-digit increases of recent years.
“Around 40 percent of the retail books in the Philippines are actually unsecured,” Wong said.
“Unsecured means if they were to get defaulted or if they become delinquent, the credit costs that will be incurred by the banks will be high,” he added. “So, the banks will need to provide for the entire exposure. So that’s the challenge.”
The conflict, now in its third week, escalated after strikes by the United States and Israel on Iran. And Philippine banks are navigating the fallout amid softening credit growth.
Outstanding loans from big banks went up 9.3 percent in January from a year earlier to P14.2 trillion, preliminary data from the Bangko Sentral ng Pilipinas showed. This was the softest annual expansion since the 8.6-percent increase recorded in February 2024.
Lending to businesses rose 8.2 percent to nearly P12 trillion, the weakest pace in 21 months.
Consumers continued to borrow, with retail loans rising a solid 21.3 percent to P1.9 trillion, driven by credit card and auto lending. Even so, the pace of growth was the slowest in three years.
On asset quality, data showed that nonperforming loans (NPL), or debts overdue by at least 90 days and at risk of default, accounted for 3.31 percent of the industry’s total loan portfolio. That marked the highest gross NPL ratio since November 2025, when the share stood at 3.32 percent.
At present, Wong said Moody’s has a “stable” outlook on Philippine banks.
“At this juncture, our view is that the operating environment remains stable, and that’s because of our expectation that GDP (gross domestic product) growth will be stronger than last year,” he said.
