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Monday, October 23, 2017 | MANILA, PHILIPPINES
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Date posted: Friday, December 11, 2015 | Manila, Philippines

Financial Intermediation

Banks turn to retail amid fall in trading gains

That was how most banks viewed 2014 after phenomenal trading gains earned the year before evaporated. The low interest rate environment coincided with the start of the Philippines’ adoption of the stricter Basel 3 capital standards. Add to that the volatility caused by signals from the US Federal Reserve that it was poised to hike rates from zero.

In a preemptive move, the Bangko Sentral ng Pilipinas (BSP) tightened policy rates twice, and introduced a series of measures meant to rein in speculation in the property market.

Security Bank Corp. was among the few that managed to keep their heads above the water.

Previously known for its corporate banking and trading services, the bank expanded into the retail market and embarked on a rebranding campaign to boot. To signal its focus on the consumer market, it enlisted a popular Filipino beauty queen as endorser.

The bank closed last year with a 29.2% increase in gross revenue to P19.13 billion, allowing the lender to climb 22 notches to the 98th spot of this year’s Top 1000 Corporations. Its net income also rose a faster 41.5% to P6.99 billion.

Security Bank bucked the gloom in the industry, as the combined revenue of banks in its category barely increased, while their aggregate net income even fell 2.2% year on year. Data from the Philippine Statistics Authority showed that the industry’s gross value added grew by 7.8% in 2014, slower than the 12.2% the previous year.

Top lender BDO Unibank, Inc. (ranked 14th this year) also did well, with its gross revenue rising 7.8% to P87.90 billion, and its earnings up 11.2% to P22.80 billion.

The Philippines’ second and third biggest lenders, however, turned in weaker results. Metropolitan Bank & Trust Co.’s (ranked 20th) revenue slipped 2.4% to P56.58 billion, even as the bank grew earnings by 6.2% to P17.74 billion.

Bank of the Philippine Islands (24th) grossed P51.20 billion, climbing by 7.4% year on year, but profitability dipped 8.3% to P13.27 billion.

On the insurance front, Sun Life of Canada (Philippines), Inc. (23rd) led the pack with a gross revenue of P51.99 billion, exceeding last year’s figure by 25.1%. Net income doubled to P4.30 billion.

The Philippine American Life and General Insurance Co. (42nd) trailed its Canadian rival with a revenue of P35.18 billion, down by 1.6%. Its earnings also dropped by 28.3% to P5.011 billion.

As 2015 wore on, financial market volatility persisted, aided in no small way by the uncertainty of the Fed’s liftoff. In the first half of this year, the Philippine financial intermediation sector grew only by 5.1%, slowing down from the 12.6% in 2013 and the 7.2% last year.

Despite a volatile external environment, the Philippine financial sector was among the few in Asia to have enjoyed a positive outlook in light of the BSP’s early adoption of stricter capital standards.

-- Jochebed B. Gonzales
*Send e-mail to 'Joch at jbgonzales@bworldonline.com or follow her on Twitter @jochebedgon.

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