BPI sees robust economy, lending growth in 2019

MANILA, Philippines — Ayala-led Bank of the Philippine Islands (BPI) expects to sustain a double-digit lending growth next year as it remains bullish on the county’s economic expansion despite higher interest rates.

BPI president and chief executive officer Cesar Consing said the listed bank sees its loan book expanding in the “teens” level in 2019 with the sustained economic  growth.

“We are still trying to figure that out. I’d say it will obviously be in the teens especially if the economy continues to grow the way it has been growing. It may not be the same pace in the last four or five years but it will still be healthy growth,” Consing said.

The loan portfolio of the 167-year old bank grew by nearly 13 percent to P1.27 trillion from January to September.

“I actually think 2019 could be a better year for the economy because if you look at 2018 we were faced with high oil prices and high food prices and so that raised inflation. The central bank responded to that by raising rates,” he said.

Inflation averaged 5.1 percent in the first 10 months of the year as it steadied at a near-decade high of 6.7 percent in October due to the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the weakening peso as well as higher oil and food prices.

This exceeded the BSP’s two to four percent target set between 2018 and 2020.

The central bank has raised benchmark rates by 175 basis points in five consecutive rate-setting meetings since May this year to rein in inflationary pressures.

Economic managers lowered this year’s gross domestic product (GDP) growth target range of 6.5 to 6.9 percent after it averaged 6.3 percent in the first three quarters of the year.

“Ultimately what is good for the economy is good for banks. A strong economy is obviously good for banks,” Consing said.

The bank president said the BSP now expects inflation to come down due to lower oil prices and stable food prices.

“When you think that the combination of oil prices having come down and with the interventions done by the government on the food side, the inflationary pressures are probably less so inflation should begin to probably taper off. And if inflation begins to taper off, the pressure to raise interest rates will subside a little bit and I think that might be better for the economy as a whole,” he said.

According to Consing, the series of rate increases by the BSP could still be absorbed by the country’s strong economy.

“I think the capacity of the economy to take those increases is still there. Now if rates went up by another 200 basis points, I don’t know,” Consing said.

Likewise, he explained the rate increases have not affected the quality of loans of BPI.

“I am feeling a lot better about the trajectory of the economy now that I was a few months ago because our fear was policy rates would continue to go up in response to inflation that was continuing to go up,” he said.