Brake the bank

When, as early as October last year, the Bangko Sentral ng Pilipinas (aka BSP) announced that it would force banks to raise the cost of their real estate lending, everybody figured that the BSP was stepping on the brakes in property-related financing.

In no time at all, the BSP ruled that banks could only give property loans of up to 60 percent of the market value of the collateral, from the previous 80 percent, in effect tightening the flow of credit to the real estate sector by as much as P200 billion a year.

Question: Would the BSP rule really slow down the property-related lending by banks?

Its own figures showed that, last year, the total exposure of banks to the property sector, in terms of loans to both the buyers and the developers, went up to P1.22 trillion.

At this point, nobody could as yet really say what would be the impact of the BSP move to take away some P200 billion from the real estate loan pie.

Certainly the banks would still make a lot of money.

But everybody also knew that, instead of giving the guys down here in my barangay a little break in getting mortgage loans, the BSP actually succeeded in making life harder for all those struggling buyers of shelter units.

Its move would mean the home buyers would have to cough up bigger amounts for down payments and they would have to get higher loans which would mean higher interest costs.

To think, the BSP itself even boasted at one time that the banking system had enough capital to absorb any possible—i.e. still not sure—losses in its property-related loans.

What was the rule for, then? Wala lang?

* * *

FREDERICK Dy, the main stockholder of the phenomenal Security Bank Corp. (resources of about P400 billion), recently remarked that the bank could also aspire to become one of the “best managed” financial institutions in the Asean.

It was possible that, much like a cheerleader in UAAP basketball games, Dy was only trying to rally the SBC crowd. After all, SBC just announced some major changes in its top management.

But then again, at least according to stock market pundits, Dy might have also slipped in revealing some secret plans of the bank, particularly regarding its preparation for the eventual market integration of the Asean starting this year.

According to reports, Dy would become chair emeritus of the publicly listed SBC, while its current president and CEO, Alberto Villarosa, would take his place as chair.

Named to become SBC president and CEO on April 28 this year was another retail-banking guru by the name of Alfonso Salcedo Jr.

An alumnus of Ateneo de Manila and Harvard Business School, Salcedo had more than 20 years experience in marketing consumer products in Procter & Gamble, San Miguel, Vicks and Citibank, aside from serving as president of two large insurance companies.

Moreover, Salcedo seemed to share exactly same banking background as Villarosa.

Both of them honed their banking basics at the Citibank group, although Salcedo stayed the longest in the retail banking operations, and both of them eventually transferred to the Ayala group to head thrift bank BPI Savings.

The decision of SBC to get Salcedo, at least according to stock market wags, should signal the bank’s direction toward the lucrative and risky middle market—i.e. consumer business like mortgage, car loan, and other retail credit.

Last year under Villarosa, the bank embarked on what it called “re-branding” program, shifting its focus to retail banking. Its success could perhaps be seen in the 43 percent increase in its net income to P7.2 billion, 20 percent increase in deposits to P247 billion, and 17 percent increase in loans to P194 billion.

Anyway, when Freddy Dy mentioned, perhaps in passing, something about the Asean market, the curious among stock market watchers quickly noted that the bank, only in October last year, also partnered with a certain FWD Life Insurance Group.

Now, the FWD group happens to be the life insurance arm of Hong Kong-based Century Pacific Group, which happened to be owned by Hong Kong-based businessman Richard Li Tzar-kai, who also happened to be the son of Li Ka-shing who, in turn—by all accounts, happened to be the richest man in Asia.

Even prior to its partnership with the local SBC, the FWD group already established footings in Hong Kong, Thailand and Indonesia.

Question: Did the stock market think that the partnership between the FWD group and SBC could be a template for other projects in Asean?

Security Bank makes these insurance products easily accessible with dedicated FWD Life Financial Solutions Consultants (FSCs) present in each branch to provide professional advice about customers’ individual insurance needs.

Already, stockbrokers were starting to talk about SECB, which was the symbol of the bank in the PSE ticker tape, although the bank has already become a “favorite” of sorts in the market.

Well, another bank—albeit smaller SBC—even marketed itself as the next Security Bank in its recent IPO.

* * *

STILL in banking, our dear leader, Benigno Simeon aka BS, finally signed an executive order (EO 179) providing the guidelines on the rehabilitation of United Coconut Planters Bank or UCPB.

The order provided for the “privatization” of the so-called coco levy assets, which of course included a huge block of UCPB shares, thus making the bank rehabilitation an important aspect of the executive order.

UCPB president Jeronimo Kilayko stressed that the rehabilitation program would give the “one giant step,” because it would mean the bank could raise its capital for expansion.

Already, from what I gathered, a number of investors ( read as “other banks”) sent feelers to UCPB regarding merger or acquisition, mainly offering fresh capital to the bank.

Why not—with UCPB being perceived in the banking industry as having some competitive edge, with its 188 branches nationwide, despite its stagnant capitalization since 1986 when the Aquino (Part I) administration sequestered the bank.