Banking Sector Advisory: What is the state of the banking sector amidst inflation?

Former Philippine Finance Chief Benjamin Diokno announced on January 8 that he expects a 100-basis-point decrease in policy rates in 2024, though actual decision would still be driven by data. This is the effect of domestic inflation rates going down on the back of the central bank’s aggressive hikes over the past quarters.

The banking sector, led by the three biggest banks, was enjoying double-digit cumulative returns since 2020, outperforming the Philippine Stock Exchange (PSE) benchmark.

But in late 2023, as investors expanded their portfolios, banks were slowly moved to the sidelines as preferred sector, a fact highlighted when more foreign investors sold off their bank shares.

Banks are still expected to benefit from the rate cuts and lower inflation, at least in the near term, as loans become more viable.

The best years are behind now for the sector. But they are not necessarily out of the picture.

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ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to internal and external clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She has a Master of Business Administration (Finance) degree, with distinction, from the University of London, and a Bachelor of Science in Business Administration degree, cum laude, from the University of the Philippines. She also passed the CFA Level I exam and is a Licensed Fixed Income Market Salesman (FIMS), a Certified UITF Sales Person (CUSP) and a Certified Securities Specialist (CSS). She is a naturally curious person and likes to travel here and abroad.

ARIZ MARCELINO is an Equities Research Officer at Metrobank’s Trust Banking Group, covering select large-cap index names across various sectors. He earned his degree in Banking and Finance from New Era University and successfully passed the CFA Level 1 exam. He is also a Certified UITF Sales Person (CUSP) and a Financial Modelling and Valuation Analyst (FMVA). When not at work, Ariz unwinds by watching popular sitcoms and anime series while sipping a cup of hot matcha latte.