Nikita Anand, primary credit analyst at S&P Global Ratings, said the Philippine banking sector's return on average assets could normalize to the long-term average of 1.2 to 1.4 percent over the next two years, after peaking at about 1.5 percent in 2023.
"This is because net interest margins will decline in line with policy rates. A moderating cost-to-income ratio and increasing share of retail loans could push profitability above our forecast," Anand said.
The Bangko Sentral ng Pilipinas (BSP) is largely expected to continue its easing cycle until next year, reducing interest rates to support economic growth amid stable inflation. Lower rates typically reduce the profitability of lending activities, pressuring bank earnings.
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