Philippine banks to post highest net interest income growth in Southeast Asia

PHILIPPINES: While banks in Singapore and Thailand are expected to see a contraction this year, Philippine banks are expected to post an average 11% growth in net interest income, helped by robust lending—the highest net interest income growth in Southeast Asia—though they may face headwinds in 2026 as corruption probes into flood-control projects threaten government spending.

The earnings outlook for Philippine banks may also be buoyed by the Bangko Sentral ng Pilipinas’ (BSP’s) surprise rate cut earlier this month, which could further drive loan demand.

The Philippine economy has been supported by low inflation, a strong labour market, and steady remittance inflows, which have helped private consumption. The World Bank said the economy grew 5.4% in the first half of the year, while Bloomberg Intelligence (BI) noted it is less vulnerable to export slowdowns compared with its regional peers.

The Edge Singapore reported, citing data compiled by BI, that Philippine banks outpaced the expected 4.3% growth for Indonesian lenders and 3% growth for Malaysian banks, while data for Vietnamese lenders was insufficient for analysis.

According to BMI Research, “Should the ongoing probe uncover corruption across other infrastructure projects beyond flood control, it could lead to even tighter scrutiny on government spending and reduce spending substantially below fiscally programmed level.”

State-owned banks like Land Bank of the Philippines may be more exposed to a slowdown in infrastructure building than private enterprises, given their larger share of infrastructure loans, BI senior analyst Sarah Jane Mahmud said.

Singapore-based DBS Group Holdings said such developments could dampen business and consumer confidence.

Lower earnings expectations for Singaporean banks were linked to concerns over falling net interest income gains and new tax rules, BI noted. In Thailand, high household debt and a weakening economy continue to drag down bank performance. Meanwhile, Indonesian banks are seeing muted demand for consumer loans due to job insecurity.

According to KPMG, Vietnamese banks could struggle to sustain growth amid unresolved non-performing loans that could affect the short-term business results of banks. /TISG

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