business

PH banking system resilient vs. impact of health crisis

May 15, 2020

REFORMS instituted in the past serve as buffers for the Philippine banking system vis-à-vis the impact of the global pandemic caused by the coronavirus disease 2019 (Covid-19), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said.     In a briefing aired over the central bank’s Facebook page Thursday, Diokno said the domestic banking system and the Philippine economy in general is facing the pandemic “from a position of strength.”     He said the domestic financial system is the country’s first line of defense against the pandemic, and the banking industry is up for this task since it remains adequately capitalized with total banking assets accounting for 81.7 percent of the financial system’s resources as of last February.     “Reforms have been put in place to maintain sufficient buffers in times of crisis and ensure business continuity to serve financial consumers and to keep the economy going,” he said.     The sector’s overall loan quality “was satisfactory”, with a non-performing loan (NPL) ratio of 2.1 percent, he said.     Deposits remain the banks’ main funding source with a share of 85.2 percent of the total.     Capital adequacy ratio (CAR), a gauge of banks’ financial strength, of universal and commercial banks (U/KBs), stood at 15.4 percent on a solo basis, and 16 percent on consolidated basis as of end-2019.     These are higher than BSP’s 10-percent minimum threshold and Bank of International Settlements’ (BIS) 8-percent minimum requirement.     Total portfolio grew by 10.2 percent year-on-year as of last February.     “I believe the banking system is now benefiting from prudential reforms carried out during the last 20 years. Moving forward, the BSP will continue to pursue proactive measures aimed at further strengthening the banking system,” Diokno said. (PNA)

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Bank lending expands faster in March

May 15, 2020

OUTSTANDING LOANS disbursed by universal and commercial banks rose by 12.9% in March, faster than the downward-revised 12% pace in February, according to data from the Bangko Sentral ng Pilipinas (BSP).     Inclusive of reverse repurchase agreements, lending rose by 14%, quicker than the upward-revised 11.3% logged in the prior month.     Data showed the rise in production loans, which made up 87.6% of the total credit, continued to be the main driver of growth. Lending to the sector grew quicker at a pace of 12% from the 9.4% seen in February.     The sustained increase in production loans is attributable to an increase in credit for real estate activities (21.8%); information and communication (20.8%); financial and insurance activities (17.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (6.8%); and electricity, gas, steam and air-conditioning supply (7.7%).     Other sectors also saw rise in loans except for manufacturing (-0.4%) and mining and quarrying (-5.3%), the BSP said.     On the other hand, growth of loans disbursed for households eased to 22.9% from the upward-revised 37.7% logged in February. This was mainly due to the slower expansion in credit card and motor vehicle loans during the month.     UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the pickup in lending to the market’s reaction after the easing moves done by the central bank since 2019.     “Since last year, we know that the BSP has been on an easing stance. RRP (reverse repurchase rate) cuts were made including other liquidity measures such as the RRR reduction. The market has been responding and liquidity in the market has been ample and growing,” Mr. Asuncion said in an e-mail.     In 2019, the BSP slashed rates by a total of 75 basis points (bps) before opting for a pause. By yearend, the overnight reverse repurchase rate was at four percent while lending and deposit rates were at 4.5% and 3.5%, respectively.     Meanwhile, reserve requirement ratios (RRR) were slashed by a total of 400 bps last year, which reduced the RRR of big banks as well as thrift and rural banks to 14%, four percent, and three percent as of end-2019.     BSP Governor Benjamin E. Diokno has said monetary policy tends to work with a lag of about three to nine months.     For this year, the BSP has been aggressive as it seeks to curtail the impact of the virus on the economy. It has cut rates by a total of 125 bps thus far which reduced overnight reverse repurchase, deposit and lending rates to record lows of 2.75%, 3.25% and 2.25%, respectively.     The BSP has likewise reduced RRR of universal and commercial banks by another 200 bps to 12%.     In the coming months, the lockdown measures may dent lending growth, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.     “Bank loans could start to slow down in April and May 2020 and could even potentially contract in Q2 2020 together with the broader economy, depending on how long the lockdown would last,” Mr. Ricafort said.

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SMC drops $2-B Holcim acquisition

May 12, 2020

SAN MIGUEL Corp. (SMC) is terminating its $2.15-billion acquisition of Holcim Philippines, Inc. after failing to obtain clearance from the Philippine Competition Commission (PCC).     In a statement on Monday, the diversified conglomerate said it would “no longer proceed” in buying 85.73% shares in Holcim after its agreement lapsed on May 10 without getting the required approval of the PCC.     With the discontinuation of the proposed acquisition, SMC said the supposed tender offer of Holcim shares held by minority shareholders is likewise withdrawn.     SMC, through First Stronghold Cement Industries, Inc. (FSCII) — a unit of SMC subsidiary San Miguel Equity Investments, Inc. — was buying 5.53 billion common shares in Holcim, the local arm of Switzerland-based LafargeHolcim Ltd.     The deal was made on May 10, 2019 with the purpose of expanding SMC’s foothold in the country’s cement industry.     As part of the transaction, FSCII was supposed to do a tender offer of shares in Holcim held by minority investors equivalent to 14.27% of its total issued and outstanding capital stock.     While the Department of Trade and Industry earlier said the buyout might result in lower prices of locally produced cement, the PCC said it might substantially lessen competition in the grey cement market in Luzon.     It flagged that FSCII is under SMC, and SMC is under Top Frontier Investment Holdings, Inc., which has two cement plants set to open in the next two years: Northern Cement Corp. and Oro Cemento Industries Corp.     The PCC likewise noted that SMC President and Chief Operating Officer Ramon S. Ang is the majority owner and chairman of Eagle Cement Corp.     “Sellers, distributors, and hardware owners in the relevant markets viewed Eagle Cement and Northern Cement as ‘sister companies’ and part of the Top Frontier group,” the competition watchdog said in January.

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Aboitiz allots P1.82 B for COVID-19 mitigation efforts

May 12, 2020

THE Aboitiz Group has committed a total of P1.82 billion for COVID-19-related efforts including P388 million in donations for medical frontliners and relief goods for poor families.     The amount includes the P220-million donation from the Ramon Aboitiz Foundation (the Aboitiz family-based foundation) and personal donations in Cebu.     The Aboitiz group also donated P100-million donation to Project Ugnayan led by the Philippine Disaster Resilience Foundation with other major business groups for the distribution of crockery vouchers to urban poor families in Greater Metro Manila.     The group also donated personal protection equipment, thermal scanners, alcohol, folding beds, tents and food packs worth P67.56 million consisting of P50.7 million from Aboitiz Foundation, P4.5 million from Aboitiz business units, P2 million from KINDer, P176,000 from employees for Davao frontliners, and P10.2 million from offline donations via Unionbank transfers.     For its workers, the Aboitiz group has allotted P900 million in financial assistance while its employess have also chipped in P1.3 million for the group’s “no work, no pay” utility and security personnel in the group’s Taguig and Cebu offices.     Aboitiz Power Corporation has also remitted P536 million to its power plant host local government units under Energy Regulation 1-94.     Last April 6, the Energy Department issued Department Circular 2020-004-00080, dictating that ER 1-94 funds received by host communities of power generation companies may now be used in full for efforts towards managing the effects of COVID-19.     This is, to-date, the contribution of AboitizPower to host communities where its power facilities are located.     “As the COVID-19 situation remains uncertain, the Aboitiz Group will continue to deploy assistance nationwide. Simultaneous with ensuring that our team members’ needs are covered, we also focused on our in-kind and monetary donations to communities that need them the most,” said Sabin M. Aboitiz, Aboitiz Group President and Chief Executive Officer.     Extending its campaign, the Aboitiz Group has also poured in significant aid efforts in Visayas and Mindanao through the initiative of Aboitiz business units (BUs) based there.

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POGOs, service providers must pay taxes: Dominguez

May 12, 2020

FINANCE Secretary Carlos Dominguez III has reiterated that Philippine offshore gaming operators (POGO) and their service providers must pay their 2019 tax liabilities before they are allowed to operate.      Aside from paying the POGO franchise tax, Dominguez said: “both service providers and licensees must also remit to the BIR (Bureau of Internal Revenue) all current 2020 withholding tax liabilities.”     In a Viber message to journalists Thursday, he said these businesses “must also execute an understanding to pay the BIR all their arrears.”     “Once these are complied with, the BIR (Bureau of Internal Revenue) will issue a tax clearance to enable them to operate,” he added.     POGO operations were halted along with most businesses after Metro Manila was placed under community quarantine last March 15, which was expanded to an enhanced community quarantine for mainland Luzon on March 17 to arrest the spread of the coronavirus disease 2019 (Covid-19).     The government is training its eyes on POGOs and their service providers after some have been found to be operating illegally.     The sector is regulated by the Philippine Amusement and Gaming Corp. (Pagcor), which forecasts the government’s gaming-related revenues from this sector to exceed the P75.54 billion collected last year.     BIR Deputy Commissioner Arnel Guballa earlier said there are about 60 POGO licensees to date that are “mostly registered with Pagcor.” (PNA)

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PCCI asks financial institutions to extend loan maturity for biz

May 12, 2020

THE country’s largest business organization, the Philippine Chamber of Commerce and Industry (PCCI), is asking banks and other financial institutions to extend loan maturity for enterprises for at least one year for them to be able to recover from the impact of the community quarantine due to the coronavirus disease 2019 (Covid-19) outbreak.     In a statement Monday, PCCI said the extension should include loans due between March 16, 2020 to December 31, 2020.     PCCI President Benedicto Yujuico said the business group’s members have a growing concern on their “deteriorating cash positions and diminishing ability to avoid massive lay-offs” as most businesses are closed during the enhanced community quarantine (ECQ) that started in mid-March.     “The ECQ has brought substantially all businesses to a sudden and unexpected stop. Many are now facing economic distress, forcing them to resort to drastic cost-cutting, lay-offs, and pay cuts.  Even as the government slowly relaxes the quarantine measures, we expect that the effects of this crisis will continue to be felt and that businesses will continue to struggle through the end of 2020,” Yujuico said.     He added a loan extension for at least a year will go a long way to preserve employment and averting permanent closure of businesses, which are clients and partners of banks and the non-bank financial institutions (NBFIs).     “Without the support of Philippine banks and other NBFIs, many businesses will likely be forced to shut down,” the PCCI chief added.     Metro Manila, Central Luzon, and Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) regions, where a large percentage of businesses are located, have been placed under ECQ for two months. (PNA)

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