BSP relief may hit bank profitability, S&P says

Recent measures to cushion Philippine borrowers may lead to lower bank profitability, according to a report by S&P Global.

The ratings firm said the Bangko Sentral ng Pilipinas (BSP)’s extension of regulatory relief measures to banks and financial institutions—aimed at mitigating the impact of rising energy costs and supply disruptions caused by geopolitical tensions in the Middle East—could weigh on earnings.

“The move may undermine bank profitability as net interest margins peak and credit losses remain elevated,” said S&P Global Ratings credit analyst Nikita Anand.

“But it could avoid a spike in nonperforming loans. The temporary suspension of loan repayments for a year after the state of emergency began should help borrowers better cope with cash flow problems,” she added.

Approved under Monetary Board Resolution No. 296 on April 8, the measures allow banks to grant temporary grace periods of up to six months on loan payments for affected borrowers, while agricultural loans may be deferred for up to one year, subject to assessment.

The BSP also allowed lenders to temporarily exclude these loans from being classified as past due or nonperforming for up to one year, giving borrowers breathing room while helping maintain stability in banks’ balance sheets.

Latest central bank data showed that loans from universal and commercial banks (U/KBs) expanded at a slower pace in January 2026 compared with the revised 9.6 percent growth recorded in December 2025.

Several banks, including the Bank of the Philippine Islands, Chinabank, BDO Unibank, and Metropolitan Bank and Trust Company, all reported record net profits in 2025, particularly due to better loan performances.

However, S&P said risks could increase if the crisis drags on. Under a downside scenario, S&P warned that prolonged disruptions may lead to pockets of financial strain, particularly among mid-sized firms, small businesses, and lower-income borrowers.

Despite the potential hit to earnings, S&P expects the Philippine banking system to remain resilient under its base-case scenario. Nonperforming loans (NPLs) are seen to stay manageable, given banks’ limited exposure to sectors most directly affected by the conflict.

Still, the ratings agency said Philippine banks are entering this period from a position of strength, supported by solid profitability in recent years, as well as strong capitalization and liquidity buffers.