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Biz Buzz

Biz Buzz: Bankers fired

/ 03:17 AM May 22, 2015

Traders of a large universal bank have been axed after it was revealed that they were engaging in so-called “wash trades”—buy-and-sell transactions whose effects are immediately reversed, but not without first padding their trading volumes or manipulating prices of the securities involved.

The two traders—one from the treasury department and the other with the sales department—worked for a large universal bank that is owned by a tycoon with interests in airlines and real estate.

Biz Buzz learned that they were discovered after banking regulators conducted an investigation and noticed the unusual patterns of trade that resulted in no visible effects in the bank’s portfolios (precisely because they would trade debt securities between departments and trade them back either on the same day or the following day).

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Because of this, the trading volume of the bank looks really impressive to the uninitiated (but is, in truth, padded).

Here’s where it becomes complicated. An unsigned white paper is now being circulated in banking circles accusing the treasurer and sales head of this bank of negligence for allowing the wash trades to happen right under their noses.

However, Biz Buzz learned that the smear campaign is being spearheaded by no less than a former official of the very same bank—who lost his job to the current treasurer.

This has “conflict of interest” written all over it.

To make things more interesting, the Bangko Sentral ng Pilipinas has now broadened the scope of its investigation into possible wash trades committed by other banks.

Wash trades actually are a very common—but illegal—practice.

Sometimes the trades are made internally between the banks’ various departments, and sometimes they are done between two or more conniving banks.

The effect is that the traders get to pad their trading volumes and, more alarmingly, distort and taint securities’ prices and interest rates, which are based on the most recently executed trades.

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“Everybody is on their toes because the BSP is investigating the issue,” said one banker familiar with the case.

In any case, both culprits have been fired. While the poor government securities dealer has yet to find a new job, the trader from the bank’s sales unit wormed her way into the loving arms of a mid-sized bank with headquarters on Ayala Avenue.

Will the fallout spread? Abangan.–Daxim L. Lucas

PAL changes mind about London

There have been rumors for some time now that Philippine Airlines would end flights to London as early as the third quarter of 2015 due to weak passenger load.

But that no longer seems to be the case.

In fact, business has been improving, and the flag carrier plans to keep what remains its sole route to Europe, PAL president Jaime Bautista said, citing no small help from cheaper fuel and a better flight schedule.

“We’re not ending it. You can quote me,” Bautista told Biz Buzz recently.

Whispers over ending the Manila-London route have been swirling.

First PAL cut flights there to four from the previous five per week.

We’ve also heard that the carrier was—at one point—looking for buyers for its slot in London’s Heathrow Airport.

It’s not as if this particular rumor had no basis. Bautista shared that he actually gave PAL’s staff marching orders to improve the Manila-London passenger load or it would all end “by August this year.”

Whether he was serious or not is probably irrelevant by now.

PAL’s staff took the order to heart and the passenger load, percentage-wise, rose to the high ’70s.

Bautista noted that, although it was still losing money, the improvement was enough for the airline to keep the route going.

He said the business would improve further if PAL were to get its wish to leave Manila around midnight and arrive in London in the morning.

That’s well and good for the carrier.

We hear from reliable sources that it’s just about to begin the process of entertaining investors, rumored to be from the Middle East, which we’re told “makes the most sense” or elsewhere.

Stay tuned for updates here.–Miguel R. Camus

Friendly options

Profriends Inc. is going public. But there have been talks that the mass housing developer may instead sell shares to a new investor.

Particularly, there’s this property firm owned by a tycoon that’s said to be interested in taking over the company.

Profriends chair Guillermo Choa on Thursday said that the initial public offering (IPO) was still a go, most likely by the end of the year.

To recall, the company has obtained approval from the Securities and Exchange Commission to raise as much as P7.7 billion from an offering of 385.75 million new shares at a maximum price of P20 a share.

This will bring to public hands about 10.91 percent of the company’s outstanding shares.

But the company will now have to update its prospectus and await the second-quarter results, hence the new timetable by the “latter part of the year.”

Asked about this rumored interest from a tycoon-owned property firm, Choa said: “There are a lot of options.”

Aside from the IPO, other fund-raising options are on the table, he added.

“It could be one step or two steps (IPO and buy-in deal),” he explained.

Proceeds from this offering are meant to fund residential development projects, acquisition of land, as well as an investment in Williamton Holdings Inc.—a wholly owned subsidiary that will handle the in-house financing requirements of the group’s home buyers.

Profriends, which sells residential units priced at between P800,000 and P3 million per unit, sees sustained demand from first-time home buyers such as young upwardly mobile professionals, people currently renting space in the inner city, province-based buyers and overseas Filipino workers.

“There are a lot of talks with a lot of groups,” Choa said.–Doris Dumlao-Abadilla

No deal for Ramcar

A bid by battery-maker Ramcar group of the Agustines family to invest in a battery company in Vietnam—which would have been the curtain-raiser for the local firm’s regional play—is not pushing through.

It was earlier reported that Ramcar would acquire an initial 20-30 percent stake in a large state-owned battery firm in partnership with a local group, which would have been a great business proposition in view of Vietnam’s booming automotive market.

But we heard that the talks have bogged down due to pricing issues, and also because Ramcar realized that the stake being offered was too small to make an impact.

That said, Ramcar—riding on its turnaround from debt woes of old—remains on the prowl for other acquisition/investment opportunities.–Doris Dumlao-Abadilla

E-mail us at bizbuzz@inquirer.com.ph. Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ON INQ BUSINESS to 4467 (P2.50/alert).

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TAGS: Air Transport, airlines, bankers, Banking, Biz Buzz, housing, London, PAL, Philippine Airlines, Profriends, property, Ramcar, Real Estate, Traders, wash trades
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