FNBB CEO, Steven Bogatsu, has said despite the positive business sentiments, boosted by the increased business confidence, growth in secured lending facilities will continue to be hampered by current pressures on the high value retail property sector and commercial office properties.
Writing in the bank’s annual report for 2018, Bogatsu said they however anticipate growth in targeted financing for some sectors of the economy such as agriculture, manufacturing and tourism which will be supported by credit guarantees from development finance institutions.
The FNBB chief said given the current optimistic outlook for the local economy, positive impact is expected across various sectors.
“However, as consumer indebtedness levels remain a concern, the bank will continue to exercise caution when lending into this market,” he said. The local economy is expected to grow by 4.0 percent and 4.3 percent in 2018 and 2019 respectively.
Bogatsu said this trend is demonstrated by first quarter 2018 growth of 4.8 percent quarter-on-quarter compared to 0.9 percent at the same time last year. This growth is said to have been supported by an increase in diamond prices, resilience in the service sector, as well as continued supply-side stability.
FNBB, according to Bogatsu, has adopted a cautious credit-risk appetite, which saw the bank’s gross advances grow by 4 percent year-on-year, compared to market growth of 7.5 percent, largely driven through the growth in consumer lending group schemes.
“The increase in business credit extension reflects the return of confidence in the economy which in turn indicates improvement in employment opportunities due to business expansion,” Bogatsu wrote.
While business credit growth is expected to exceed growth in lending to households, Bogatsu says the caution that total market credit growth is likely to remain muted at below 7.0 percent through to 2020.
Bogatsu said they have also witnessed an increase in Non-Performing Loans (NPLs), particularly for property and vehicle asset finance, which affected the retail and lower end of the business segment.
“Given the stresses with the macros, impairments are expected to remain high for both property and vehicle finance categories.”
Currently FNBB has an NPL portfolio of P1.13 billion.