Fitch Ratings has included its rated Philippine financial institutions (FIs) as among the 12 percent of its 141 rated firms globally that have improving outlooks for 2022.
In a report emailed Wednesday, the debt rater said 80 percent, or 113 issuers, have neutral outlooks while 8 percent, or 11 institutions, have a deteriorating outlook.
“The vast majority of financial institution (FI) sector and subsector outlooks are Neutral for 2022, reflecting the expectation for a continued, albeit slowing, global economic recovery and improvement in operating environments for banks, non-bank financial institutions (NBFIs) and (re)insurers,” it said.
The report said loan asset quality for banks and NBFIs are expected to deteriorate “as fiscal and policy support wane.”
“However, we believe banks will offset these reductions with improved pre-impairment profitability and the reduction of loan loss allowances and excess capital buffers accumulated through the pandemic,” it added.
The report said the rated NBFIs’ “solid capital levels and improved funding profiles should help mitigate a moderate pick-up in credit costs.”
“NBFI operating performance is also expected to be supported by gradually rising interest rates,” it said.
Fitch Ratings expects the monetary policy tightening around the globe “to be supportive of life insurers’ returns” but added, “the negative impact of historic low rates on profitability will remain for some time.”
This, as low rates have resulted in an increased allocation to higher-risk alternative investments by life insurers, as well as a structural shift toward more capital-light models.
“The economic recovery should result in volume growth in non-life business lines, with pricing discipline expected to continue. Claims are expected (to) normalize, but costs should rise with inflation,” it added. (PNA)
