Ayala-led Bank of the Philippine Islands (BPI) is keen on bidding for the Philippine consumer and retail banking business of Citibank, a move that could easily double its portfolio in these higher-margin segments.
Asked about Citi’s plan to exit the local retail banking market, BPI president Teodoro Limcaoco said BPI would “take a look” as soon as a divestment process was in place.
“We’ve always been admirers of the Citibank retail business. It is an excellent franchise. We’ve always looked at it, but we never believed that Citibank would ever give up on the Philippines. And unfortunately for our colleagues in Citibank, [exiting the] Philippine business is a global decision,” Limcaoco said in a press briefing after the bank’s stockholders meeting on Wednesday.
“Most likely we’ll be interested. It’s a great business,” he added.
Citi has about one million credit card customers and about 50,000 retail banking clients, mostly in the affluent segments, in the Philippines. Its credit card franchise ranks among the top three in terms of credit card spending share.
Limcaoco said BPI would have sufficient capitalization to bid for these assets, once put on the auction block.
Citi recently announced plans to exit its consumer franchises in 13 jurisdictions, namely: Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.
Because Citi is keeping its institutional businesses in these markets and would thus need to retain its local banking licenses in these jurisdictions, Limcaoco said it was probable that Citi would divest assets in individual markets instead of bundling all these assets.
“We like the quality of their portfolio. We like the talent and we like the technology … On a combined basis, if you put the BPI and Citibank portfolio [together], we will almost double the BPI business,” said Marie Josephine Ocampo, BPI head of mass retail segment.
In the first quarter, BPI’s net income declined by 21.7 percent year-on-year to P5 billion due to one-time tax adjustments in connection with previously booked loan provisions as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law took effect.
Total revenue for the first three months declined by 1.5 percent to P24.3 billion as net interest income declined by 6.5 percent to P16.9 billion, driven by a 31-basis point contraction in net interest margin to 3.31 percent.
Meanwhile, non-interest income increased by 12.1 percent to P7.4 billion on the back of robust fee income, which rose by 27.8 percent to P5.7 billion, driven by bancassurance, asset management, transaction banking, and investment banking businesses.
Total operating expenses for the first quarter declined by 2.3 percent to P11.8 billion. The bank spent 48.6 centavos to earn every peso, more efficient than the 49 centavos spent to earn every peso in the same period last year.
The bank’s provisioning level fell by 12.7 percent year-on-year to P3.6 billion while bad loans were kept at 2.76 percent as a ratio of total loans, much lower than banking peers.
For the full year, BPI chief financial officer Maria Theresa Marcial-Javier said loan loss provisions this year would still likely be large, but would significantly go down from last year’s buffer of P28 billion.
BPI’s total loans as of end-March stood at P1.4 trillion, down by 5 percent year-on-year, due to softer demand across most loan products, except for mortgage and microfinance which registered growth rates of 10.9 percent and 10.5 percent, respectively.
Total deposits were flat year-on-year at P1.7 trillion, 82.6 percent of which consisted of low-cost deposits which grew by 11.9 percent, offsetting a 34.4-percent decline in time deposits. For every peso of deposits generated, the bank lent out 81.6 centavos.
BPI’s total assets ended the quarter at P2.2 trillion, almost flat year-on-year. Total equity stood at P280.8 billion, with an indicative common equity tier 1 ratio of 16.6 percent and a capital adequacy ratio of 17.5 percent, both above regulatory requirements.
Return on equity was 7.2 percent, while return on assets stood at 0.93 percent.