Bank of Commerce bullish on trade financing business

Bank of Commerce (BankCom) said trade financing surged last year amid robust imports and exports in the aftermath of the tumultuous COIVD-19 pandemic.

The lending arm of conglomerate San Miguel Corp. (SMC) launched the trade finance business in 2019 as it focused on expanding loans to small, medium and large enterprise customers.

“The reopening of the economy, coupled with higher domestic consumption and improved global demand, provided a unique opportunity for BankCom’s trade business to scale up and provide well-thought-out solutions to meet the needs of both exporters and importers from within its client base,” BankCom president Michelangelo R. Aguilar said in a stock exchange filing on Tuesday.

The niche segment is turning into a significant growth driver for BankCom.

It said one of the widely-recognized trade business activities was the issuance of standby letters of credit to sellers of goods. These are made on behalf of the bank’s clients who purchase the goods.

The recovery in global trade, especially in the postpandemic period, allowed BankCom to generate P70 billion in issuances last year, which was more than 20 times the P3.4 billion issued in 2019.

Moreover, it estimated that so-called trade contingent liabilities for 2022 jumped 637 percent in three years to P19 billion in average daily balance.

“The unparalled expansion in the highly competitive area of trade mirrors the strong partnership of BankCom and SMC in supporting the operational requirements and exigencies of trade-heavy businesses,” Aguilar said.

He added the lender was able to help sustain the operations of small-and-medium enterprises, speeding up their recovery .

BankCom said in the same filing its trade fee income grew by 753 percent from 2019 to 2022.

“A close, internal collaboration among our corporate banking, branch banking, and operations groups was essential to making this work despite the challenges the industry has faced,” Aguilar said.

BankCom received its universal bank license last year, allowing it to offer more products and services amid plans to compete head-on with the country’s top lenders.

This came after BankCom completed its P3.4-billion initial public offering in March.

From January to September last year, BankCom reported a net income of P1.49 billion, which was more than double its earnings from same period in 2021. Revenues also grew 25 percent to P5.82 billion.

“The banks’ strong performance was driven mainly by higher revenues from an expanded portfolio of products and services, including investment banking, following its recent upgrade to universal banking status,” BankCom said in a previous filing.