Moody’s: PH Banks Can Expect Robust Growth in the Next Decade

The Philippines’ favorable population mix and rising per-capita income will trigger the robust growth of the country’s banking system in the next 10 years, according to international credit watcher Moody’s Investors Service.

Moody’s, in a recent review on Asia-Pacific banks, even added that the Philippine banking system is “looking to benefit from rapid and divergent demographic changes.”

“Over the next decade, of the 17 banking systems in Asia Pacific, banks in Japan, Hong Kong, Korea and Taiwan, in particular, will face challenges from the effects of shrinking prime-age populations and declining proportions of working people,” said Moody’s Senior Vice President Christine Kuo.

“By contrast, banks in India, Indonesia and the Philippines will see growth opportunities in the same period from the effects of rapidly growing prime-age populations and increasing proportions of working people,” she added.

Banks will benefit the most from countries with favorable demographic trends that come with income growth and technological advancements.

“Countries where income is growing fast along with prime-age populations while dependency ratios are declining will benefit most from demographic changes. India, Indonesia and the Philippines fit this bill,” Moody’s said.

“For banks in Indonesia and the Philippines, technological advancements will remove a key obstacle to customer acquisitions,” they added.

The Philippines, according to the ratings agency, is expected to incur a per-capita GDP (gross domestic product)  of around $18,000 by 2030.

It’s the population, silly

Countries with shrinking number of prima-age population will translate to smaller core customer base and a credit-negative development.

“In aging markets, pricing competition among banks will intensify as some banks offer more attractive interest rates or fees to lure new customers from competitors. This will pressure overall profit margins for the sector,” said Moody’s.

Aging markets will also slow down economic growth and decrease bank profit according to the agency.

via Business Mirror / Bianca Cuaresma