S&P GLOBAL RATINGS expects Philippine bank lending to grow by 11% to 13% in the next two years, supported by the country’s resilience to global tariff shifts and a growing focus on consumer loans.

“The Philippine economy is expected to be resilient to tariffs due to its low reliance on exports,” Nikita Anand, director of financial institution ratings at S&P Global Ratings, told a webinar on Wednesday.

“This could benefit banks, translating to stable operating conditions for the next two years. We forecast strong credit growth of 11% to 13% over the next two years,” she added. She expects loans to grow faster at about 18% after that.

Outstanding loans of universal and commercial banks rose 11.3% year on year to P13.37 trillion as of May, according to Philippine central bank data. This was slightly faster than 11.2% in April.

Ms. Anand said banks’ increased focus on consumer lending would help diversify their portfolios and boost profitability.

“Unsecured consumer loans such as credit cards and personal loans will continue to grow rapidly,” she said. “Yields for these products are significantly higher compared with corporate or housing loans, providing opportunities for profitability improvement.”

Corporate loan growth is expected to stabilize after rebounding in 2024, while overall asset quality is likely to remain steady in the next two years, aided by lower inflation and borrowing costs.

The banking system’s bad loan ratio rose to 3.39% in April from 3.3% in March, though it was lower than 3.45% a year earlier. This was the highest level since 3.54% in November 2024.

Still, Ms. Anand warned that the rising share of unsecured consumer credit and household debt could pressure banks’ asset quality.

“We are observing an uptick in the nonperforming loan ratio of unsecured loans, i.e., credit cards and personal loans,” she said. “We believe this trend is likely to continue over the next few years.”

S&P Global Ratings also flagged potential vulnerabilities stemming from Philippine banks’ significant exposure to the property sector, alongside geopolitical tensions that could affect loan demand.

“Any disruptions or sharp corrections in property prices will affect the banking sector’s revenues,” Fiona Chen, associate director at S&P Global Ratings, told the webinar.

She said property developers are increasingly capturing a larger share of the financing market amid weak activity in traditional income-related lending. “The interconnectedness is increasing, and these loans are not monitored at all.”

“We are also seeing elevated vacancy rates in office spaces and condominiums,” she said. “Both of these pose some risk to the banking sector because the sector has significant exposure to the real estate market — about 20% of its revenues,” she added.

Ms. Chen further cautioned that inflationary pressures due to rising geopolitical tensions and oil prices could dampen credit demand. Geopolitical instability could also weaken the peso and weigh on companies with foreign currency exposure.

Still, she noted that Philippine companies remain relatively shielded. They would be able to absorb any currency depreciation due to the “relatively small” share of external debt in their funding, she added. — AMCS