Inflation Risks Raise Concerns for Philippine Banking Sector

Philippine banking giant BDO Unibank said rising inflation tied to the ongoing Middle East conflict could in time dampen loan growth, and also start to put some pressure on asset quality. This, even while the bank keeps posting solid financial results, so far.

At the virtual PSE STAR: Investor Day event, BDO Executive Vice-President and Investor Relations and Corporate Planning Head Luis S. Reyes Jr. noted that the bank’s balance sheet is still in good shape even if the economic backdrop stays pretty volatile. Still, he flagged that if inflation lasts longer than expected, it could cool down borrowing activity and make repayment more difficult for some customers.

Reyes added that, so far , the bank has not really observed serious deterioration in credit quality, but management is staying vigilant. Persistent inflation, he said, may eventually weigh on both consumers and businesses, and that’s where the caution comes from.

Strong Loan and Deposit Growth Continue

Even with all the economic uncertainty around, BDO still managed to show strong lending growth in the first quarter of 2026. On a year over year basis, gross loans climbed 16% to P3.77 trillion from P3.26 trillion and this was backed up by double digit growth across basically all customer segments. 

BDO also saw solid deposit growth. Total deposits went up 15% to P4.429 trillion as of March 2026, versus P3.847 trillion a year earlier. A big part of these deposits came from low cost current and savings accounts, usually called CASA deposits. 

CASA deposits hit P2.906 trillion, up from P2.704 trillion during the same period last year. Reyes said the bank wants to keep the momentum going by pushing forward with branch expansion, while at the same time strengthening its digital banking capabilities.

Economic Pressures and Banking Outlook

The worries BDO raised are showing up more clearly as inflation risks start climbing across the Asia Pacific banking scene, mainly because oil prices keep moving higher and there are ongoing geopolitical tensions. When inflation rises it can whittle down consumer buying power and also push borrowing costs up. That can, in turn, play into repayment performance and the broader pace of banking activity. 

At the very same time, a lot of analysts still see BDO as financially steady. Earlier reviews from Moody’s pointed to the bank’s solid underwriting practices, stable asset quality and a pretty strong liquidity position. 

BDO is still the Philippines’ biggest lender, and it keeps trying to grow both its physical branch network and its digital services. The leadership team says these moves should help keep customer growth intact, even if the economic situation turns more challenging in the months ahead.