Banking and Finance Industry

The GSIS and SSS did not have a history of going bankrupt despite the succession of corrupt government that began in the Marcos era. Even the PSE has been profiting lately and did not get buried into debt in the past. The central bank can be trusted in keeping our dollar reserve that has been increasing in the past 5 years. The Philippine banks have been shielded from the credit crunch woes of the U.S. due to tight risk aversion and frugality. I think the Filipinos in general, are very careful investors with the exception of a few rich & greedy ones that believe in instant money growth like PICS and networking.

[Weina]

what about the rumours that those in their retirement have a hard time processing their retirement funds? I know a lot of retired teachers kasi datina di nakuha ang retirement funds nila with GSIS. Sabi kasi sa kanila dati walang pera daw ang gobyerno. the problem kasi with our gov't is it is tainted with so much corruptions that causes people to lose trust completely. pano pag at the time you need your fund the gov't would tell you 'no fund is available right now'.?

[bartstrife99]

Royal Bank of Scotland launches in RP market

The Royal Bank of Scotland Group (RBS) on Monday said it has re-branded ABN AMRO Bank in the Philippines as The Royal Bank of Scotland (Philippines) as part of the ongoing process to integrate and re-brand some of the ABN AMRO businesses it acquired in the takeover of the bank by the RBS–led consortium.

John McCormick, chief executive of global banking and markets for RBS in Asia-Pacific, said the integration of RBS with ABN AMRO businesses has created a stronger organization with greater resources and capabilities. He said RBS has identified Asia as a growth engine for the group "and the Philippines will play an important role in that ambition."

"Our global expertise as a group combined with the local capabilities will further strengthen our position in the Philippines, allowing us to meet clients’ needs through innovative and integrated solutions," he said in a statement.

To mark the launch of RBS into the Philippines, the bank announced Monday plans to launch its Global Transaction Services business in the country, signaling the importance of the Philippines market to the growth of RBS's Asian franchise.

RBS has moved quickly to integrate the transaction business of ABN AMRO with its existing capabilities, leading to the creation of RBS Global Transaction Services, which is currently ranked in the top five positions globally and recognised for its strong product leadership in cash management and trade finance.

"The re-branding of ABN AMRO signifies more than just a name change. As we become part of the Royal Bank of Scotland, we are now able to offer our clients a larger array of innovative products and an enhanced service platform. We are very excited about growth opportunities in the Philippines and looking forward to expanding our franchise particularly in transaction services and investment banking, where we have built a leadership position in corporate finance advisory, structured and leveraged finance," said Billy Goguingco, country executive for the Philippines, in his opening speech at the launch ceremony.

First it's only a rumor. I've only heard of one teacher who died and its the beneficiaries that have had a hard time claiming it. It's expected to happen especially when there is legality involved with the said beneficiaries. My family and my neighbors did not encounter any problems with GSIS. In fact, one of my parents got the retirement benefit in full lump-sum.

[Weina]

well those i personally knew of course are not rumours. it did happened to those retired elementary teachers just don't know however if they already received their funds now.

[-TC-]

http://www.bworld.com.ph/BW090308/content.php?id=022
House ratifies credit bureau bill

BusinessWorld
September 3, 2008

THE LAST hurdle to the enactment of the proposed Credit Information System Act was removed late Monday, after the House of Representatives ratified the measure.

Manila Rep. Jaime C. Lopez, House banks and financial intermediaries committee chairman, said the bill would be immediately transmitted to Malacañang for President Gloria Macapagal Arroyo’s signature, echoing what Senator Edgardo J. Angara said Monday afternoon after the Senate ratified the measure.

The Securities and Exchange Commission (SEC) said it would begin drafting the implementing guidelines once it receives a copy of the new law.

"We have to see first the details of the final provisions before we can act on it," SEC Corporate Secretary Gerard Lukban said in a phone interview.

Mr. Lopez said the establishment of the Credit Information Corp., whose board would be headed by the SEC chairman, is not contingent on the approval of the 2009 budget.

"The appropriation will no longer undergo budget deliberations or inclusion in the 2009 budget proposals," he told BusinessWorld.

"It has gone through a special enactment which only needs the President’s signature for implementation. It already has a certification from the National Treasury."

The corporation would have an authorized capital stock of P500 million divided into common and preferred shares. The National Government would own 60% of the common shares and must shell out P75 million.

The corporation would essentially collect credit information about borrowers and disseminate them to banks, life insurance firms, credit card companies, state lending institutions, credit raters and to borrowers themselves.

It must "acquire and use state-of-the-art technology and facilities in its operations to ensure its continuing competence and capability to provide up-to-date negative and positive credit information," according to the bill
Mr. Lopez said that funds to buy these facilities would come from the P75-billion National Government appropriation.

[-TC-]

http://business.inquirer.net/money/b...osses-for-govt

Pera, tax relief spell losses for gov’t
By Michelle Remo
Philippine Daily Inquirer
09/05/2008

MANILA, Philippines -- The government stands to lose P26.5 billion in potential revenue next year following the enactment of the Personal Equity and Retirement Act (Pera) and the decision to exempt minimum wage earners from income tax.

Based on the Department of Finance estimates, Pera is expected to cost the government P11.5 billion in potential tax collection for the government, while the income tax relief would result in P15 billion in foregone revenue for a one-year period.

For this reason, Finance Secretary Margarito Teves has urged legislators to pass new tax measures that will help generate more income for the government and offset the impact of Pera and the income tax exemption on the state’s financial position.

The measures being pushed by the DOF are the rationalization of fiscal incentives and the amendments to the Sin Tax law.

The DOF wants to rationalize the granting of tax- and duty-free privileges to businesses by limiting the coverage of the incentives to exporters and big-ticket investors.

The DOF also proposes the imposition of a uniform excise tax rate on cigarettes and another on alcohol to replace the current complex system of taxation of sin products.

“We need new measures so the government can maintain its revenue,” Teves told reporters.

Under Pera, earnings from contributions to one’s personal retirement account are exempted from income tax. Individuals who open personal retirement accounts are also entitled to a tax credit equivalent to 5.0 percent of their contributions.

To encourage employers to contribute to the retirement account of an employee, Pera allows employers to deduct the contributions from their taxable income.

Congress passed Pera to encourage Filipinos to save and prepare for their retirement.

Sen. Edgardo Angara, author of the Pera, said the law is expected to help boost the Philippines’ savings rate to between 34 and 40 percent of the country’s gross domestic product over the medium term. Currently, he said, savings rate is less than 30 percent.

In the meantime, the income tax reform bill was recently passed and took effect in July. One of the primary provisions of the law was the exemption of minimum wage earners from the income tax.

It also allows professionals and self-employed individuals to automatically deduct 40 percent from their gross earnings to determine taxable income.

The Bureau of Internal Revenue earlier said the impact of the law exempting minimum wage earners from the income tax was already reflected in the government’s tax collection performance in July and August.

Revenue Commissioner Lilian Hefti said the exemption took away P2 billion in potential tax collection in July and another P4 billion in August.

In August, more taxpayers started to observe the law as they learned about its benefits, Hefti explained.

[Porknight]

Originally Posted by -TC-

The DOF wants to rationalize the granting of tax- and duty-free privileges to businesses by limiting the coverage of the incentives to exporters and big-ticket investors.

Well I hope that they won't hurt so much the market with this decision.

Originally Posted by -TC-

The DOF also proposes the imposition of a uniform excise tax rate on cigarettes and another on alcohol to replace the current complex system of taxation of sin products.

“We need new measures so the government can maintain its revenue,” Teves told reporters.

Sin products ? Btw if they decide to increase the taxation from alcohol and tobacco , I totally agree and I am a smoker. At least I'll be more happier now that I know my stupid habit is helping the government.

[nostalgicbabe]

Originally Posted by -TC-

http://business.inquirer.net/money/b...osses-for-govt

Pera, tax relief spell losses for gov’t
By Michelle Remo
Philippine Daily Inquirer
09/05/2008

MANILA, Philippines -- The government stands to lose P26.5 billion in potential revenue next year following the enactment of the Personal Equity and Retirement Act (Pera) and the decision to exempt minimum wage earners from income tax.

Based on the Department of Finance estimates, Pera is expected to cost the government P11.5 billion in potential tax collection for the government, while the income tax relief would result in P15 billion in foregone revenue for a one-year period.

I wonder why critics of the EVAT such as Mar Roxas are not bringing up the issue of PGMA supporting tax relief for minimum wage earners and bigger income tax exemptions for taxpayers in general, as well as the PERA. The President has been portrayed as being greedy to the extent of squeezing oil taxes from Juan de la Cruz, but nothing is being said by her critics about these developments that will in fact cost the government a lot of money but will benefit ordinary Filipinos.

[Weina]

Bangko Sentral disclosure

Market Files
Lito U. Gagni, Business Mirror, August 13, 2008

The disclosure by the Bangko Sentral Pilipinas (BSP) of the banking industry’s P89-billion exposure to the collapsing collateralized debt obligations (CDOs) in the subprime market in the United States is commendable. But not the way it views the exposure as “smallish” when ranged against the banks’ total assets of P4.48 trillion and its dismissive tone in saying the industry is insulated from the effects of the exploding mortgage market, which has so far claimed a writedown or losses of $478 billion for big foreign banks and investment houses.

Although P89 billion is less than 1 percent of the total assets of the banking industry, this “smallish” amount is not that small when viewed from the perspective of the industry’s capital, which, as per the BSP’s own data, is P462 billion as of the end of December 2007. It would be interesting to know how the banking industry would treat this CDO implosion that has already resulted in the wipeout of the erstwhile-respected Bear Stearns in the United States and the huge losses other financial institutions suffered.

Framed from this perspective, the P89 billion in CDO exposure of the banking industry, now in danger of being written off or declared as a loss, assumes an ominous 19 percent. This means that for every P100 of capital that the banking industry has—and this includes the banks’ debt issuances to bolster their capital stock by way of the hybrid and Tier-2 capital—the industry has investment exposures of P19. This is a sizable sum that the BSP has to adequately address by way of whipping the banking industry into line in raising additional capital to insulate it from the fallout of the CDO mess.

And to think that the banking industry has just come out of huge capital charges from their fire sale of foreclosed assets, raising at most P30 for every P100 in so-called nonperforming assets. The fact that the banking industry was not spared from the fallout of the exotic debt instruments that big-name investment banks packaged and then sold as prime-grade investment securities only goes to show that there is no such thing as a safe investment instrument when there are excesses in greed of the global financial industry.

A four-part series of the Financial Times on the subprime mess that tackled also the rescue of US mortgage giants Fannie Mae and Freddie Mac (where the banking industry had “smallish” exposures, too, as per the BSP) paint a rather difficult economic environment ahead: a vicious cycle where banks hurt by the subprime mess cannot be made to lend more, say, for the housing industry, that, in turn, leads to further constriction in the banks’ financial condition. And that could impact on the country’s financial risk profile, too, especially since local banks cannot be made to be forthright in terms of their exposures to CDOs.

That FT analysis showed how greed took the better of the CDO investors as investment banks sold prime-grade-rated debt securities that have as underlying asset base those of mortgage papers that were granted by banks to credit-risk housing borrowers. When banks allow borrowers, who cannot even pay for their car mortgages, to get loans for house purchases, then risk is magnified. We understand that these are the same CDO papers that local banks are invested in, to the tune of P89 billion.
http://www.businessmirror.com.ph/081...opinion05.html

I agree that Tax relief for PERA is a revenue lost from the government's end. 401k may be tax exempted while one is still contributing but once you withdraw or start receiving the benefits upon retirement, that's the time when the taxes will be applied. IRA on the other hand cuts the tax in real time. The government should emulate IRA instead.

Originally Posted by -TC-

http://business.inquirer.net/money/b...osses-for-govt

Pera, tax relief spell losses for gov’t
By Michelle Remo
Philippine Daily Inquirer
09/05/2008

MANILA, Philippines -- The government stands to lose P26.5 billion in potential revenue next year following the enactment of the Personal Equity and Retirement Act (Pera) and the decision to exempt minimum wage earners from income tax.

Based on the Department of Finance estimates, Pera is expected to cost the government P11.5 billion in potential tax collection for the government, while the income tax relief would result in P15 billion in foregone revenue for a one-year period.

For this reason, Finance Secretary Margarito Teves has urged legislators to pass new tax measures that will help generate more income for the government and offset the impact of Pera and the income tax exemption on the state’s financial position.

The measures being pushed by the DOF are the rationalization of fiscal incentives and the amendments to the Sin Tax law.

The DOF wants to rationalize the granting of tax- and duty-free privileges to businesses by limiting the coverage of the incentives to exporters and big-ticket investors.

The DOF also proposes the imposition of a uniform excise tax rate on cigarettes and another on alcohol to replace the current complex system of taxation of sin products.

“We need new measures so the government can maintain its revenue,” Teves told reporters.

Under Pera, earnings from contributions to one’s personal retirement account are exempted from income tax. Individuals who open personal retirement accounts are also entitled to a tax credit equivalent to 5.0 percent of their contributions.

To encourage employers to contribute to the retirement account of an employee, Pera allows employers to deduct the contributions from their taxable income.

Congress passed Pera to encourage Filipinos to save and prepare for their retirement.

Sen. Edgardo Angara, author of the Pera, said the law is expected to help boost the Philippines’ savings rate to between 34 and 40 percent of the country’s gross domestic product over the medium term. Currently, he said, savings rate is less than 30 percent.

In the meantime, the income tax reform bill was recently passed and took effect in July. One of the primary provisions of the law was the exemption of minimum wage earners from the income tax.

It also allows professionals and self-employed individuals to automatically deduct 40 percent from their gross earnings to determine taxable income.

The Bureau of Internal Revenue earlier said the impact of the law exempting minimum wage earners from the income tax was already reflected in the government’s tax collection performance in July and August.

Revenue Commissioner Lilian Hefti said the exemption took away P2 billion in potential tax collection in July and another P4 billion in August.

In August, more taxpayers started to observe the law as they learned about its benefits, Hefti explained.

[lauston_rr28]

Originally Posted by odyssey

First it's only a rumor. I've only heard of one teacher who died and its the beneficiaries that have had a hard time claiming it. It's expected to happen especially when there is legality involved with the said beneficiaries. My family and my neighbors did not encounter any problems with GSIS. In fact, one of my parents got the retirement benefit in full lump-sum.

Its a different story from what I know. The actual members (not beneficiaries) had the hard time getting their retirement contributions from GSIS, reason is guess what?...no fund.
Wonder how they managed to buy P53.501-million worth of Juan Luna and Fernando Amorsolo paintings in 2002. Hmmm..
Also, there are cases that even if you are fully paid from your loans youll be suprised that such loans still do exist complete with fine and interest.

[lauston_rr28]

Sorry forget to put my 2 cents in it...

[-TC-]

http://www.bworldonline.com/BW091808/content.php?id=004

‘Depositors have nothing to fear’ — BSP

Local banks’ exposure to Lehman limited

BusinessWorld
September 18, 2008

AMPLE WHEREWITHAL will allow local banks to service their obligations and mitigate the impact of losses from the collapse of US investment bank Lehman Brothers, the Bangko Sentral ng Pilipinas (BSP) yesterday said.

"The banking system remains sound and stable. The depositors have nothing to fear at this point," central bank Governor Amando M. Tetangco, Jr. told reporters at the sidelines of a government economic briefing.

BSP Deputy Governor Nestor A. Espenilla said the worst that could happen to local banks was reduced profits, and stressed that their ability to pay obligations would not be impaired.

"There’s nothing to worry about at this time. The banking system’s asset base is P5 trillion and [its] capital base [is more than enough]," Mr. Espenilla said.

Lehman Brothers’ collapse — the firm is so far the largest casualty of the global credit crisis — has stoked fears that a number of Philippine banks would be directly affected.

But central bank officials insisted that the exposure of local banks to Lehman was small in relation to total assets. Mr. Tetangco said the BSP had surveyed local banks and found out that exposures totalled about P15 billion or roughly 0.3% of the industry’s assets.

These were in the form of structured notes such as collateralized debt obligations, which are securities backed by pools of assets.

A number of local banks have disclosed investments in Lehman. Metropolitan Bank and Trust Co. on Tuesday said it held a total of $20.4 million worth of bonds and had set aside $14 million for potential losses. Banco de Oro Unibank said it had allocated P3.8 billion in provisions.

They were joined yesterday by Rizal Commercial Banking Corp. which said it had prepared P980 million as a buffer.

"There are some banks which have disclosed their exposures. I think this should be taken as a positive sign. It shows these banks have the resources to absorb a drop in the price of their investments in Lehman Brothers," Mr. Tetangco said.

Bank capital was adequate, he said, especially after the industry was required to set aside funds appropriate for risks being taken in line with the implementation of the Basel 2 framework.

The capital adequacy ratio, which refers to banks’ capital in relation to the risks that they take, stood at 14.71% as of end-2007 on a solo basis and at 15.7% if banks’ subsidiaries are counted. These remain above the BSP’s required minimum of 10%.

"We’ve learned from the 1997 [Asian crisis] experience. Banks have to hike capital to survive this kind of disruption. Our banks will be able to handle this," Mr. Espenilla said. — Gerard S. dela Peña

--------------------------------------------------------------------------

Fitch says no impact on credit ratings

BusinessWorld
September 18, 2008

PHILIPPINE BANKS’ exposure to bankrupt Lehman Brothers would not have an adverse impact on their credit scores, global debt watcher Fitch Ratings yesterday said.

The London-based credit watchdog noted that the Lehman-related investments were limited. While recent moves to set aside capital to cover for the losses may hurt earnings, credit ratings would not necessarily be in jeopardy, it said.

"The exposure is small compared to their capital position. Given the exposure, the impact will be modest. We don’t see downside risk in the ratings," Alfred Chan, analyst for financial institutions at Fitch Ratings, told BusinessWorld.

Fitch made the assessment following a series of disclosures made by Asian banks on their exposure to failed Lehman, with Japan-based banks being listed as the bank’s largest creditors.

Yesterday, top tier bank Rizal Commercial Banking Corp. (RCBC) said it had invested in Lehman structured products tied to Philippine sovereign bonds.

The Yuchengco-led bank said it allocated P980 million as a buffer against the US firm’s potential failure to repay debts. It joined similarly listed banks Banco de Oro Unibank Inc. and Metropolitan Bank & Trust Co., which on Tuesday announced setting up provisions to cover their Lehman-related losses.

"This is to ensure that any possible writedown that may result from this exposure will have been properly and fully provided for," RCBC said.

RCBC added that the additional capital cover would come from its excess reserves, so that the move would not weigh on the bank’s capital base, currently at P27.4 billion, or capital adequacy ratio — a measure of a bank’s financial health — of 20.97%. The bank forecast a net income of P2.5-2.8 billion this year compared to P3.21 billion in 2007.

Top tier banks Bank of the Philippine Islands and China Banking Corp., as well as thrift bank Philippine Savings Bank, yesterday disclosed having no exposures in Lehman. Security Bank Corp. said that while it does not have Lehman-related assets in its books, it had $10 million worth of exposure in another US bank Merrill Lynch, which is to be gobbled up by Bank of America.

In its report released yesterday, Fitch said Asian banks’ "net exposures are small and the direct impact on banks will be limited".

"However, the agency will continue to investigate the full extent of these banks’ on-and-off balance sheet exposures and take account of potential losses that will add to the existing burden of writedowns stemming from the credit crisis."

In a separate interview, however, Mr. Chan pointed out that the ratings agency remained bullish about the adequacy of the Philippine banking industry’s capitalization.

"If we look at Asia Pacific banks in general, these are mostly healthy banks, banks with good capital buffer. In the event they do provisions, the earnings may be impacted depending on the amount of provisions but from the balance sheet point of view, the capital is expected to stay intact," Mr. Chan said. — Maria Eloisa I. Calderon

[red_jasper]

September 22nd, 2008

Metrobank jumps gun on Lehman creditors
Daxim Lucas

The Philippines’ biggest bank jumped the gun Monday on its local competitors as it joined the worldwide rush to secure exposures and grab remnants of collapsed investment banking icon Lehman Brothers.

In a hastily called press conference, officials of Metropolitan Bank & Trust Co. announced that they had asked the court to place local Lehman Brothers units under a “creditor-led rehabilitation” program.

“Metrobank has taken legal action against the two Lehman Brothers subsidiaries,” executive vice president Vicente R. Cuna told reporters, explaining that the move was meant to secure Metrobank’s P2.4-billion loan to the Lehman units.

The petition—which was filed Monday with the Makati Regional Trial Court—effectively gives the claims of Metrobank seniority over other creditors and stakeholders of the 158 year-old US investment bank, who are also expected to start moving to secure their interests worldwide.

Metrobank identified the Lehman Brothers units as Philippine Investment One Inc. and Philippine Investment Two Inc., which the bank identified as “subsidiaries of Singaporean company Lehman Brothers South East Asia Pte. Ltd.”

Metrobank’s legal filing strengthens its hand in gaining control of the two firms’ assets—mostly bad loans and foreclosed assets—in the event that they are unable to continue paying their loans.

Cuna said, however, that both firms “continue to operate profitably” and were “solvent,” adding that the petitions were filed to ensure the continued normal operations of the companies and defer all claims, actions, and proceedings against them.

“This creditor-led rehabilitation is a preemptive move to protect the bank against possible dissipation of assets by foreign claimants,” he said, adding that Metrobank’s loans to the two firms remained current.

Cuna said Metrobank was the first creditor to initiate legal moves against the Lehman units, which have also outstanding loans from another local bank which he did not identify.

The Lehman firms are so-called “special purpose vehicles” that hold bad loans and foreclosed real estate assets that Lehman Brothers bought from local financial institutions at a steep discount for eventual resale at a profit.

Between 2006 and 2007, the Lehman units acquired bad assets from Development Bank of the Philippines at a discount to their P9.95 billion face value, and another discounted set of bad assets from United Coconut Planters Bank with a face value of P8.68 billion. The acquisitions were partly funded by a P2.4-billion loan from Metrobank.

Both SPVs are also involved in a legal dispute with restaurateur Victor Villavicencio, who claimed that the firms acquired his foreclosed properties in violation of the Constitutional prohibition against foreign ownership of land.

[Igsuonnimo]

AMLC recovers P1.4-B dirty money from suspicious bank accounts
By Delon Porcalla
Tuesday, September 23, 2008
The Philippine Star


The Anti-Money Laundering Council has recovered P1.4 billion worth of “dirty money” from so-called suspicious multimillion-peso bank accounts, but the government only allocated P15.6 million to the agency for administrative operating expenses for 2009.

“The irony of it is we regularly turn over (to the government) the money that we are able to forfeit, but not a single cent goes to us,” AMLC executive director Vicente Aquino told newsmen, after he presented the agency’s proposed budget for next year.

Aquino, who is also the assistant governor of the Bangko Sentral ng Pilipinas, said they have proposed a P34-million budget, but that the Department of Budget and Management gave them a measly P15.6 million.

Aquino revealed that there is now a proposal for agencies like AMLC to get a share of the funds that it was able to recover, in terms of winning court cases and the forfeiture of assets of corrupt government officials who have amassed ill-gotten wealth.

“We have a proposal to get a share, 25 percent net of the total cost of litigation,” he said.

But while the amount DBM allocated was minuscule, a sub-committee of the House appropriations committee headed by Pangasinan Rep. Mark Cojuangco restored the AMLC’s original P34 million budget.

“I’ll try to fight it out here (in the House). But let’s try to protect it this time,” Cojuangco told the AMLC team, referring to the P30-million budget they approved last year, but which was slashed in the bicameral conference committee that left only P15.2 million.

Aquino also reported to the House panel that they already have incurred debts from the BSP, which has been subsidizing their salaries and operational expenses, but the Commission on Audit has been questioning BSP’s “kindness.”

He told newsmen they have incurred P27 million in debts since AMLC was created in 2001.

“We are also required to reimburse the BSP. The BSP has been very kind in subsidizing us, but this cannot go on forever. The COA is questioning the BSP for being so kind,” Aquino disclosed.

Aquino pointed out that their US counterparts have a $450-million yearly allocation, and those in Australia and Singapore are also better funded. But Agusan del Sur Rep. Rodolfo Plaza said these are advanced countries.

“We are way, way below insofar as the budget (of the other countries’ AMLC) are concerned,” he said. “We want to make it (AMLC) more effective as the country’s intelligence unit. But if we were a ship, we would have sunk already.”


www.philstar.com

[Igsuonnimo]

SMC eyes control of Bancommerce
October 1, 2008 Wednesday
www.philstar.com
Zinnia dela Peña


The San Miguel Group is eyeing to complete the acquisition of a controlling stake in medium-sized commercial bank Bank of Commerce by November 2009.

The San Miguel Group, through its real estate unit San Miguel Properties Inc. (SMPI), and its retirement fund San Miguel Corp. Retirement Plan, currently owns 34.3 percent of Bancommerce.

In a disclosure to the Philippine Stock Exchange, SMPI said the group is infusing an additional P2 billion into Bancommerce to increase its stake to 51 percent.

“The closing of the transaction and payment of the subscription price for the sale share are subject to the satisfaction of certain conditions, including the issuance of applicable government approvals,” SMPI corporate information officer Ferdinand K. Constantino said.

The new investment will bring the San Miguel group’s total investment in the bank to P4 billion which, in turn, will raise the bank’s total capital base to approximately P10.42 billion.

Bancommerce is currently controlled by Antonio “Tonyboy” Cojuangco, a nephew of San Miguel chairman Eduardo “Danding” Cojuangco.

Funding for the acquisition will come from internally-generated cash, payable in four tranches of P500,000 each.

Part of the proceeds from the sale will be used to expand the bank’s branch network expansion nationwide and loan portfolio.

With the acquisition of a controlling stake, Bancommerce would serve as SMPI’s retail arm for financing for its various residential condominium projects.

The bank could tap SMPI’s customer base by offering investment and deposit products, home improvement and appliance financing.

The services of the bank could likewise be availed of by the San Miguel Group for its diverse and nationwide operations, particularly to service the financing needs of the group’s dealers, agents and wholesalers for depository and payment channels, guarantees, letters of credit, credit lines, loans and discounts. – Zinnia dela Peña

[Igsuonnimo]

BDO raises P5 B in capital buildup
By Ted P. Torres
October 1,2008 Wednesday
www.philstar.com


Banco de Oro Unibank Inc. (BDO) has completed the issuance of 500-million preferred shares, raising P5 billion for its ongoing expansion and Tier 1 capital build-up.

“The shares were issued through private placement to not more than 19 subscribers and to qualified buyers,” BDO said in a disclosure to the Philippine Stock Exchange.

BDO corporate information officer Elmer B. Serrano earlier said the indicative fixed dividend rate of the preferred share issue is 6.5 percent per annum.

Other features of the preferred share offer are: the shares are convertible into common shares three years from issue date; the shares are non-cumulative and non-participating; they qualify as Tier 1 capital; they are considered voting shares; and are perpetual in nature.

“The bank aims to undertake and complete this offer or its series A preferred shares from September to November 2008,” Serrano added.

Earlier this year, BDO issued P10-billion in unsecured subordinated debt notes.

The issue, which is also eligible a Lower Tier 2 capital, carried a coupon rate of 8.5 percent per annum and issued at 100 percent of face value. The issue was priced tightly against the five-year government bond yield.

The funds raised for the issuance of preferred shares and the P10-billion notes will be used to support BDO’s expansion plans. It will also increase and strengthen BDO’s capital base “ensuring that it has available capital for its growth plans in the coming years.”

BDO is the country’s second largest bank with assets of P676.7 billion. It has the biggest trust banking operations with assets under management of P294.2 billion and is among the market leaders in its core business lines, with a nationwide network of 657 branches and close to 1,200 ATMs.

[Weina]

Local banks complain of tight US$ liquidity

THE PHILIPPINE money market has not been spared from the global credit squeeze that has forced banks to grapple for ways to secure dollars, industry officials said yesterday.

With worldwide credit markets and interbank lending frozen, dollar liquidity among Philippine banks has been particularly tight in the past weeks as offshore banks, wary of the next domino to fall after the collapse of Wall Street’s storied financial firms, shut their doors to borrowers they deemed risky.

"That the credit market is choked or at a standstill is in many ways true. If we look at where the LIBOR is trading, it’s a clear sign that banks are wary of lending to each other offshore," Raul Martin A. Pedro, a subcommittee chairman at the Money Market Association of the Philippines, told BusinessWorld.

"What it is doing for Philippine banks is that it is a little more difficult to get dollar funding should we need to."

Banks need the dollars to serve the requirements of client importers, in particular, who open letters of credit with them.

The overnight dollar LIBOR, or the London Interbank Offered Rate, which is the world’s most widely used benchmark for short-term interest rates, had spiked 4.3 percentage points — a record one-day rise — to 6.875% early in the week, more than three times the US Federal Reserve’s key federal funds rate.

The federal funds rate is used by US banks when lending overnight to one another.

Hoarding cash has become the norm and with interbank lending nearly paralyzed, domestic banks have turned to the currency swap market for the much-needed dollar funding.

"Banks worldwide are trying to protect their capital and liquidity. For the Philippines, it’s the same thing," said Vandemir C.T. Say, president of the Chartered Financial Analyst Philippines.

The currency swap, which is essentially a money market instrument, allows local banks to buy dollars using pesos on the agreement they will sell the US currency back. It is a foreign exchange transaction that involves the exchange of principal and interest in one currency for another currency.

The high demand for dollars has buoyed the swap market, with the interest rate differential between the two currencies pushed to lows. But since dollar borrowing is being funded with pesos, banks have resorted to dumping their local currency-denominated bonds, dragging bond yields despite the double-digit inflation environment.

"Because banks wanted to be assured of dollar funding, the dollar-peso swap market interest differential has been pushed low," Mr. Pedro pointed out.

But with the progress in the US government’s bid to save its troubled financial system, the tight dollar liquidity could ease, said Marcelo E. Ayes, Rizal Commercial Banking Corp. (RCBC) senior vice president for financial markets.

"The swap points being quoted last week were negative. But now that’s not the case. The recent development — the Senate’s signing the $700-billion bailout package — is creating the liquidity needed. You can now borrow dollars cheaply," the market analyst said.

The central bank echoed the view that the dollar squeeze in the money market should be short-lived.

"There’s ample dollar liquidity in the system. There was only momentary tightness that has since corrected as evidenced by more normal spreads now," Bangko Sentral ng Pilipinas Deputy Governor Nestor A. Espenilla, Jr. said in a text message to BusinessWorld.

[jvl]

Most RP banks have investments overseas. So they surely will be affected by changes to the world economy. I just hope that the OFW's hard earned money is safe. Now-a-days, withdrawing US Dollars from banks in the provinces usually takes 2-3days.....bank policy?