MANILA, Philippines–Demand for capital will remain as strong as ever next year as local firms borrow or raise fresh equity to bankroll the expansion of their businesses, emboldened by the country’s economic prospects.
RCBC Capital, one of the country’s leading investment banks, said certain capital intensive sectors, particularly power and infrastructure, would lead demand for financing in 2015, ignoring higher funding costs due to rising interest rates.
“It’s driven essentially by project financing,” RCBC Capital president and CEO Jose Luis Gomez yesterday said. “It’s a borrowers’ market.”
Gomez said with the economy still flush with cheap liquidity, companies would continue to invest in greenfield or new projects.
Market conditions also remain stable, with the local stock market index expected to reach new record highs in 2015. This makes it easier for companies to raise cash through equity offering, improving their ability to finance the growth of their businesses.
Industries such as transportation infrastructure and power are seen to be the most hungry for financing in the coming year. Several public-private partnership (PPP) infrastructure projects were successfully auctioned off this year and work on most should start in 2015.
Also, pressure to build more power plants around the country continues to mount as the nation’s thin power supply may result in a shortfall by the middle of 2015, which can choke economic growth.
Gomez said, despite the expected glut for financing, RCBC Capital itself would focus on handling syndicated loans for local firms in the coming year amid stiffer competition in the market that led to lower fees for other types of business.
Several of the country’s large investment banks, he added, have been restructuring and hired personnel trained overseas to beef up operations. As a result, profit margins for handling transactions such as initial public offerings (IPO) have thinned.
Last year, RCBC Capital, a subsidiary of the Yuchengco’s Rizal Commercial Banking Corp., posted a profit of around P400 million. The firm expects to maintain this bottom line in 2014 and 2015.–Paolo G. Montecillo