PH financial institutions get better outlook this year

MANILA – Fitch Ratings has included its rated Philippine financial institutions (FIs) among the 12% of its 141 rated companies globally that have prospects for improvement in 2022.

In a report emailed Wednesday, the debt assessor said 80%, or 113 issuers, have a neutral outlook while 8%, or 11 institutions, have a deteriorating outlook.

“The vast majority of the outlook for the Financial Institutions (FI) sector and sub-sector is neutral for 2022, reflecting the expectation of a continued, albeit slowing, global economic recovery and improving operating environments for banks. , non-banking financial institutions (NBFIs) and (re)insurers,” he said.

The report says the asset quality of lending for banks and NBFIs is expected to deteriorate “as fiscal and policy support diminishes.”

“However, we believe banks will offset these reductions with improved pre-impairment profitability and reduced loan loss provisions and excess capital reserves built up during the pandemic,” he added.

The report states that “the strong capital levels and improved funding profiles of rated NBFIs should help mitigate a moderate recovery in borrowing costs.”

“NBFI’s operating performance should also be supported by gradually rising interest rates,” he said.

Fitch Ratings expects tighter monetary policy around the world to “support returns for life insurers”, but added that “the negative impact of historically low rates on profitability will persist for some time”.

This is because low rates have led to an increased allocation to high-risk alternative investments by life insurers, as well as a structural shift towards more capital-light models.

“The economic recovery should result in volume growth in the non-life businesses, with pricing discipline expected to continue. Claims should normalize, but costs should increase with inflation,” he added. (NAP)

Marianne R. Winn