China Bank sees loans sustaining high single-digit growth in 2024

CHINA BANKING Corp. (China Bank) expects its loans to continue growing at a high single-digit pace next year, in line with the expansion seen for 2023, as interest rates are seen to remain elevated until the fourth quarter of 2024, a senior official said.

“China Bank’s gross loans will continue to grow at a measured pace at high single digits. Several factors can stir loan growth, like sustainability of consumer spending, and business expansions, as well as government infrastructure projects,” China Bank Chief Finance Officer Patrick D. Cheng said in an e-mail.

Still, the expected pace of loan growth for this year and next would be slower than the 15% recorded in 2022, he said.

China Bank will lean on its consumer business to support continued credit expansion, Mr. Cheng said.

“Our objective is to increase our consumer loan ratio from 20% to 25% over the next five years while still maintaining growth in our corporate loan book,” he said.

“China Bank will maintain a conservative approach to managing its asset quality. The NPL (non-performing loan) ratio is projected to stay below the industry average, while NPL coverage will still be above 100%,” Mr. Cheng added.

The Sy-led bank expects the Bangko Sentral ng Pilipinas (BSP) to maintain its target reverse repurchase rate at a 16-year high of 6.5% and only begin easing its policy stance in the fourth quarter of 2024 amid lingering upside risks to inflation, China Bank Chief Economist Domini S. Velasquez said.

Lower benchmark rates could help bring its margins closer to the 4% level in the near term, Mr. Cheng said.

“Any expected drop in the yields will offset lower funding cost,” he added.

China Bank’s net interest margin stood at 4.24% at end-September.

The BSP kept its policy rate steady for the second straight time at its last policy meeting for the year earlier this month. The interest rates on the BSP’s overnight deposit and lending facilities were likewise kept at 6% and 7%, respectively.

BSP Governor Eli M. Remolona, Jr. said the Monetary Board kept its stance unchanged as “the balance of risks to the inflation outlook still leans significantly toward the upside,” due to potential pressures from rising transport, electricity and fuel prices, as well as the El Niño weather phenomenon.

“With the sum of recent information, the Monetary Board continues to see the need to keep monetary policy settings sufficiently tight to allow inflation expectations to settle more firmly within the target range… Going forward, the BSP remains ready to adjust monetary policy settings as necessary, in line with its mandate to ensure price stability,” Mr. Remolona said.

The Monetary Board has raised benchmark interest rates by a cumulative 450 basis points since it began its tightening cycle in May 2022 to help bring down inflation.

Philippine headline inflation eased to 4.1% in November from 4.9% in October and 8% in November 2022.

For the first 11 months, the consumer price index averaged 6.2%, faster than 5.6% in the same period a year ago. This is still above the BSP’s 2-4% target for 2023.

China Bank’s attributable net income grew by 16.47% to P5.35 billion in the third quarter amid continued growth in its core businesses and lower loan loss provisions. — A.M.C. Sy