Banks told to recalibrate amid old, new challenges

Navigating the uncertainty in the pace of the US Federal Reserve’s interest rate hikes, building up defenses against banking frauds and making financial services more inclusive are the key challenges faced by the banking industry today, the chief of Bank of the Philippine Islands (BPI) said.

“Right now, we are in an interesting time in the markets. We, like other banks, went to 2017 forecasting a period of gradually rising interest rates. While it is still a long-term trend, the speed of it may slow down … So that will require banks to recalibrate what they do both on the liability side and asset side very carefully,” said BPI president Cezar Consing.

Interest rates rising modestly are good for banks’ lending portfolio as it enhances net interest margins without expanding the cost of their funds.

On the security front, Consing said the same high technology being used to make services accessible to clients has become the new digital playground for criminals.

“We’ve never seen this before—not in this country, not in any other country. The level of bad stuff that goes on out there is something we’ve never experienced,” Consing said.

“What we need to do is to strengthen the defenses, and I think, we are probably among the leaders in strengthening our defenses … We know that if we are to stay ahead of the game, we have to make sure our cyber security is second to none,” Consing said.

BPI recently worked with authorities to convict a Romanian national who was engaged in ATM fraud.

On Dec. 28, 2016, Mustafa Giochan was convicted by a Makati court on two counts of violating Republic Act 8484 or the Access Devices Regulation Act of 1998. He was found guilty of using an unauthorized or counterfeit access device in an attempt to withdraw $6,200 from a BPI Paseo-Legaspi Village Branch ATM.

Last Feb. 28, he was sentenced to a minimum of 20 years of imprisonment and a penalty of P20,000. He has not been arrested as of the date of the order.

On financial inclusion, Consing said: “We’re [now] seeing real growth and we have the opportunity to make sure that growth is distributed among more people. We have to answer that development goal. We owe it to this country—to make sure that we’re financing SMEs (small and medium enterprises), self-employed entrepreneurs, retail clients, startups.”

He said bringing banks closer to the masses was something the industry has not done well. “But guess what? We have to do it because that’s the future. That’s the ultimate challenge.”

BPI grew its first quarter net profit by 25.6 percent year-on-year to P6.25 billion on higher earnings from lending, fee-based and treasury businesses. Return-on-equity reached 15 percent, up by 1.89 percentage points from the previous year.

Total revenues in the first three months went up by 17.6 percent year-on-year to P17.96 billion. Net interest income improved by 15 percent to P11.49 billion as asset yields rose alongside loan volumes.

BPI grew its loan book by 19.9 percent year-on-year to P1.03 trillion in the same period, while keeping credit quality in check. The ratio of bad loans to the total loan portfolio eased to 1.5 percent in the first quarter from 1.7 percent in the previous year.