S&P: Philippines banks resilient despite $180 billion downside risk in AsPac

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

April 16, 2026 | 12:00am

MANILA, Philippines — Philippine banks are expected to remain resilient even as a worsening Middle East conflict could expose Asia-Pacific lenders to as much as $180 billion in additional credit losses over the next two years, according to S&P Global Ratings.

In a report, the credit watcher said the region’s banking sector is facing heightened risks from geopolitical tensions, particularly through indirect channels such as higher oil prices, weaker economic activity and rising borrower stress.

“A protracted war in the Middle East would be acutely painful for Asia-Pacific banks. Under our downside scenario test, the sector’s credit losses could rise by about $180 billion over the next two years as indirect risks start to bite,” S&P said.

For the Philippines and other Southeast Asian economies, the impact is largely tied to their dependence on energy imports, which exposes them to inflation shocks and slower growth.

S&P noted that higher oil prices would “directly hurt net importers like Singapore, Thailand, the Philippines, Vietnam and India,” while second-round effects could weigh on households and businesses.

Despite these risks, Philippine banks are seen as broadly stable, supported by strong capital buffers and regulatory oversight.

The report said banking systems across the region, including the Philippines, maintain capital adequacy ratios of 15 percent to 20 percent and non-performing loan provision coverage of 100 percent to 150 percent, providing “meaningful buffers against downside risks and higher delinquencies in times of stress.”

Still, the Philippines faces specific vulnerabilities.

S&P noted that Philippine banks might be more exposed to mark-to-market losses due to their relatively high holdings of government securities, accounting for about 25 percent of assets.

The report also warned of potential spillovers from overseas labor markets, noting that disruptions in the Gulf region could affect remittance flows, which in turn may weaken deposit growth and borrowers’ repayment capacity.

Across Asia-Pacific, S&P said the bulk of the risks stem from indirect exposures rather than direct lending to the Middle East.

“Direct exposures of banks to the Middle East are low, and indirect exposures are manageable,” the debt watcher said, adding that most banks still have “sufficient capacity to absorb Middle East war pressures at current rating levels” under its baseline scenario.

Under this base case, cumulative credit losses for Asia-Pacific banks are projected at about $730 billion for 2026 and 2027, a level S&P considers manageable. However, in a downside scenario where oil prices spike and supply chains deteriorate, losses could climb to $910 billion.