Fitch Ratings has upgraded its outlook for the Philippine banking sector from ‘neutral’ to ‘improving,’ citing the potential for sustained high net interest margins (NIM) amid delayed policy rate cuts. The agency anticipates that the Bangko Sentral ng Pilipinas (BSP) will initiate monetary easing this year, albeit at a slower pace than previously expected. This should help maintain asset yields. Furthermore, opportunities for NIM growth are supported by increased unsecured lending, projected to grow by about seven basis points this year. Fitch also expects the BSP might reduce banks’ reserve requirements, boosting credit growth, now forecasted at 11.5% due to strong consumer lending and infrastructure projects. While higher interest rates pose risks, Fitch believes the resilient economy, expected to grow by 5.8% in 2024, will mitigate potential negative impacts on asset quality.