Top bank goes after Filipinos living on interest


MANILA, Philippines—No matter how low interest rates have fallen, many Filipinos still prefer to stay conservative and simply live on interest.

Many elderly people, for instance, no longer want to chase yields, preferring to keep their money in readily available bank savings accounts. There are also yuppies who prefer to put their money in time deposits.

These are just some of the investment-savvy Filipinos that Ayala-led Bank of the Philippine Islands aims to attract with its new deposit product “BPI Advance,” which targets the upper-end retail market. For a minimum of P100,000, depositors can get interest earnings a day after they place their money with the bank.

BPI offers this as “build-up” product where interest rates are tiered depending on the amount of deposit.

The higher the deposit, the higher the interest rate. For large placements, the interest rate can even match that offered by time deposits.

“The difference is you can add anytime, withdraw anytime. There are no pre-termination penalties,” says Chinky Lukban, BPI vice president and head of deposit product management.

“What it really targets are those living on interest; those who just put their accounts in time deposits and renew every month,” Lukban says. “Its main objective is really to help people manage their cash flows and give them liquidity.”

“This one will automatically give you an interest rate on the deposit from the beginning of the month on a monthly basis. It’s really giving the market an option in terms of managing their liquidity,” she explains.

A P100,000 placement in “Advance,” for instance, will earn around 1.875 percent a year while an account of at least P1 million will earn 2.375 percent a year.

For easier monitoring, interest is credited to an affiliate account while principal is kept separately in another account.

For those suddenly in need to withdraw from this facility, withdrawal is free every first day of the month.

Withdrawals on days other than first banking day of the month are subject to interest adjustment and documentary stamp tax (DST) recovery.

This is seen as a very “niche” product that can attract those between 30 and 60 years old, whether they are retirees or entrepreneurs using their interest earnings to “churn” or for short-term trades in other financial instruments.

At age 60, for instance, Lukban says that these senior citizens would mostly want 80 to 90 percent of their wealth in easily accessible cash.

“You want to keep it in short term money because you’re living on interest at that point,” she says.

“Despite the low interest rates … there are still a lot of clients who live on those interests and rely on interest income to support them in old age.”

Even for younger people between 30 and 45, Lukban says most of them want to keep at least 30 percent of their wealth in cash while using the rest for stock market trading or investing in managed funds like mutual funds.

On the part of BPI, the thrust has been to grow its CASA, or current account-savings accounts, to manage intermediation costs.

Last year, BPI’s deposits dipped by about 5 percent to P681 billion, largely due to the decline in time deposit placements even as CASA grew by 15 percent, she says.

Part of this is due to that natural shift to other instruments, especially among younger and more investment-savvy people who are familiar with more sophisticated investments.

Despite the decline in deposits last year, BPI’s total intermediated funds reached P1.35 trillion, or a 12-percent increase, as assets under management went up by 38 percent.

CASA accounts for 60 percent of BPI’s total deposit base. Of total deposits, 70 percent comes from the retail market.

“We don’t limit ourselves in (taking) deposits but to our client out there, at the end of the day, our advocacy is for them to be financially free and have a diversified portfolio … You don’t put your eggs in one basket,” she says.

This year, BPI aims to sustain a 12-15 percent growth in its CASA and this is coming from an already large base.

Its strategy moving forward, Lukban says, is to keep interest rates competitive and offer deposit products “that will answer every customer’s needs.”

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  • red

    Sorry Guys>>BPI is just giving options for mostly conservative depositors. They prefer ordinary savings or TD coz it is guaranteed by PDIC. They don’t want complicated financial packages like Long term instruments or NAVps etc . Much more they would not risk investing real estate . BPI is not talking about  loans here. Most of the senior ctitizens or those near retiring are just contented with hassle free and safe investments, and BPI is right in giving more choices for them. Friends of my late Dad belong  to the middle class, they just want a stress free life..Considering that lots of news before about bank runs, or the investment insurance pre need scams…pyramiding..Yesterday a friend of my late father was saying that he and his wife nearing 80 … they are just living normal with their sss and gsis pension combine plus their US sss pension..They worry much only about their security in their home coz their children are in USA and just 2 maids are around. Their concern is , if  suddenly..(what  happens or they kick the bucket , what would happen to their possessions.? Usually at their age nowadays , they fear more security living in their homes even on secured villages. In short they just live day by day under what they earn from interest from deposits..aside from pensions..They shun complicated…risky investments…Maybe other investments surely will give HIGH yields , true..but some senior citizens are contented just maintaining their money safe in a BANK they can trust

    • Life Insurance Philippines

      They can buy Retail Treasury Bonds (RTBs) from the banks when they are offered by the Philippine Government. Treasury Bonds are the same instruments the banks themselves use to earn at least as high as the inflation rate. They can ask their banks about it because the banks are not actively marketing them.

      As for the elderly, if they can still qualify for one (they can’t if they aren’t healthy enough), they should consider getting bond-fund insurance investment from reputable companies (pick one from the top 5 only) which are invested in conservative government and corporate bonds and has the added feature of automatically transferring their investment to their beneficiaries. That way, their family won’t need to go to court in order to get their inheritance from the bank, and they can also leave some funds to cover the sizable estate tax on the real properties they wish to leave to their children.

      • red

        About Asian Summit select offered thru PNB or Allied,, heard about it?

      • Life Insurance Philippines

        Heard about it, but not sure exactly what they are offering. Its index-linked so I guess the price goes up or down depending on some index. It was supposed to have been a limited offer for September 1 to 30, 2011 only.

        If you have at least P1M, you can go with an Asian fund offered by one of the bigger insurance players in the Philippines, which allows you to invest in Asian markets outside of the Philippines as well.

  • Sorry Guys

    Try to take a housing loan or auto loan from these banks. You will know the greed of these people. 

    The rates are based on compound interest. it can be from 10 – 36% pa. Plus many other charges on top.But see how much they offer for your deposit? 1 – 2% pa?? In case they close shop, you get 400k for your 1M deposit.

    Invest your money in real properties. The rent you will earn is much bigger than any interest offered by any bank. Value of your property will go up yearly or double in about 5 years.

  • MariusDejess

    “A P100,000 placement in “Advance,” for instance, will earn around 1.875 percent a year while an account of at least P1 million will earn 2.375 percent a year.”

    Let’s see:

    * — multiply by
    / — divide by

    1,000,000.00 * 2.375% = 23,750.00 interest earned per year

    23,750.00 / 12 = 1,979.17 interest withdrawable per month

    1,979.17 / 30 = 65.97 money budgeted for each day

    So, just save one million pesos and you will get 65.97 pesos to live on everyday — tax on interest and other bank charges and inflation not factored in.


  • Life Insurance Philippines

    Not a good investment prospect at all. With inflation at 4%, and the bank offering a measly 2.375%, that means your money is just losing value. There are better alternatives to this.

    • leodegardompruna

       Of course!

  • paul

    @malek –  the Qur’an do teach that usury is prohibited… I respect that, but you can also look at these banks this way — instead of looking at it as interests paid to depositors as aptly stated by banks, and financial intermediaries, you can look at it as

    money invested by investors (the depositors in this instance which can be safely called financial investors with the utmost minimum risk) in order to have a share in the earnings of the investee (in this case are the banks & financial intermediaries & institutions) after deducting all expenditures including expenses for aggressive advertising & marketing.

    Looking it this way, it can be said that such is justifiable since you are not placing a burden on the banks to commit to a return but that as proper investees, they should also look into the responsibility that someone had trusted them in their endeavors and it is just rightly so that they make sure to give back what have been entrusted to them.

    Looks plausible right. I know, this concept is similar to the concept applied in practice by the Islamic Banks. It is just putting it in another way.. Although one major difference is the way Islamic banks handle their investments. Which in this case is, they handle it conservatively, and with the notion of being responsible for it, which is not taken to heart and soul by common banks in the world.

  • Iggy_Ramirez

    Of course it can be interpreted in a number of ways. Saying something with the words “at least” opens a myriad of interpretations. It could mean at least one million up to one million and one hundred thousand, or at least one million to five million, etc, etc.

    And no, you don’t get the same interest rate for various amounts exceeding 1 million pesos. BPI’s website shows several interest rates beyond 1 million:

    Under Regular time deposit at BPI, interest rate between 1 million and below 5 million varies from 2.125 up to 2.375. For deposits above 5 million, interest rate varies from 2.25 to 2.5

    Under Regular time deposit at BPI Family bank, interest rate between 1 million and below 5 million varies from 2.375 up to 2.625. For deposits above 5 million, interest rate varies from 2.5 to 2.75

    Under Regular time deposit at BPI direct savings bank, interest rate between 1 million and below 5 million stays at 2.375. For deposits above 5 million, interest rate also stays at 2.5 

    Under the “Plan Ahead” of BPI Family Savings Bank, amount deposited in excess of 100k will earn a 4.5 interest rate

    Under TD Plus Tax-Free at BPI, rate varies between 3.362 and 3.937 for deposits amounting between 1 million and below 5 million. Rate varies between 3.612 and 4.187 for deposits in excess of 5 million.

    Under TD Plus Tax-Free at BPI Family Savings Bank, rate varies from 3.737 to 4.312 for deposits amounting between 1 million and below 5 million. Rate varies between 3.987 and 4.562 for deposits in excess of 5 million. 

    • Joel

      I’m talking specifically about BPI Advance which has one interest rate for deposits 1M and up.

      • Iggy_Ramirez

        As of the writing of this news, BPI has not yet published the rates of BPI Advance or the BPI Advance service in its website.

      • Joel

        I replied with a link to it but I’m not sure it will be approved by moderator. Just go to rates>>personal… You can find on the type of account “BPI Advance Savings”

      • Iggy_Ramirez

        Oh, I saw it. Thanks.

        Well, it seems its not really good putting your money in BPI.

  • KurakotNaPinoy

    Mutual funds nyo na lang, based sa risk appetite nyo.

    Tapos withraw nyo pagtapos ng mahabang panahon.

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