Bank lending seen growing another 20% in ’12

Bank lending in the Philippines is expected to grow by another 20 percent this year on the back of the rapid development of more infrastructure projects in the country.

This is according to international financial services firm JP Morgan Chase & Co., which is bullish on the Philippine banking sector for 2012.

Adrian Mowat, emerging market and Asian equity strategist for JP Morgan, said that banks in the country are likely to see higher demand for loans this year given the need to help finance expensive public infrastructure projects.

Because of the banking sector’s significant amount of assets and liquidity, Mowat added, it can afford to accommodate higher loan applications.

“Last year was a banner year for banks in terms of asset and loan growth. We expect it to maintain its favorable performance,” Mowat said in a briefing.

He also expressed confidence that banks would keep their exposure to bad debts at manageable levels even as they release more loans.

Regulators have credited the decline in the exposure of banks to bad debts to the strict adherence to prudent lending standards.

The average non-performing loans (NPL) ratio of universal and commercial banks in the country fell to the 2-percent territory last year, thus hitting levels seen prior to the Asian financial crisis of 1997.

Data from the Bangko Sentral ng Pilipinas showed that average NPL ratio—the proportion of bad debts to total loan portfolio—stood at 2.39 percent percent as of end-November 2011, better than the 3.06 percent registered as of the same month the previous year.

Over the same period, loan portfolio of the banks grew by 22.5 percent to P2.75 trillion.

“The main theme for 2012 [as far as the economy is concerned] is increased infrastructure spending. Projects that have been lined up before are likely to materialize this year, and this will help boost bank lending to above 20 percent,” Mowat said.

Mowat referred to the infrastructure projects under the government’s Public-Private Partnership (PPP) program, under which private firms are tapped to invest in public infrastructure projects.