Bankers bullish for 2016 as local businesses grow

By Jerry Maglunog

Rapid and huge bank financing is expected in 2016, as businesses grow and diversify into other ventures to take advantage of a growing market, a Bangko Sentral ng Pilipinas (BSP) official has predicted.

Businesses that are expected to go into other undertakings will be led by restaurants and other consumption and utility businesses, which are the activities that will require higher capital.

“As the period suggests, today is the best time to invest; banks are so liquid and they need to spread their money into different avenues,” Dave Fuentebella, chief financial officer of Max’s Group Inc., a 14-chain restaurant whose radar is now focused on other businesses, said.

At the moment, the BSP suggests that those in the so-called sunrise industries have bigger chances of making huge margins than those in traditional business like food and beverages. Businesses that tend to grow bigger in a short span of time are lying in power-related ventures, trans­portation and utilities. “If a business has grown remarkably, there’s no other way to go but expand and diversify. There’s no limit of how much an investor can make,” said the BSP official. The official gave the ex­ample of the country’s biggest conglomerate, San Miguel Corp. (SMC), that started with several thousands of beers during its startup period almost a century ago. After capturing the beer market, the conglomerate then ven­tured into food, processed meat, ice cream and tetra juices. In 2008, SMC earmarked over P20 billion in diversify­ing to other businesses. It is in these years that it started to buy majority shares at some of the biggest businesses, like power, gas, oil, cement, real estate, mining, infrastructure and banking. “No matter how big the business is, it will still rely on banks for financing. There is no such thing as pure equity,” said BSP deputy governor for the supervi­sion and examination sector Nestor Espenilla Jr. The deputy governor said since lending is the core essence of banking, it’s good that businesses will go to other avenues, so that more jobs and higher taxes will be generated.

“The bottom line is (that) the loan seeker will benefit.Banks will earn given the spread for longer-term loans, while businesses will grow,” he said.

It’s not only SMC that is on massive expansion and diversification. Fierce rivals Ayala Corp., SMDC, First Metro Investments Corp., Eton Properties and Aboitiz Equity Ventures are also on the same track. “People-wise, the Philip­pines is 100 million-plus. A huge number of consumers attracts any business,” PhilJets managing director Thier­ry Tea said. Tea’s business recently tied up with a Ma­laysian taxi operator to offer helicopter transport around Metro Manila for a 15-min­ute, P3,888-per-person trip. However, one source at the infrastructure arena said the little margins and stiff competition from the food and beverage business prompted SMC to diversify further. “The market for food is so crowded; it needs air to grasp for higher margin,” said Isaac David, president of MTD Philippines Inc., a Malaysian-majority conglom­erate that operates several regional government centers in the country. Observers said the Phil­ippine business startup scene is young, but it isn’t devoid of fresh ideas and talented minds. For instance, one startup, Sustainable Alterna­tive Lighting Corp., whose product is a lamp that runs for eight hours and powered by one cup of saltwater, faces huge potential abroad. “The Philippines can become a leader in using technology to address emerg­ing market problems,” said Earl Valencia, president and founder of the IdeaSpace Foundation, a Manila-based incubator and accelerator program that supports tech­nology entrepreneurs in the country. Venture capitalists from Japan, Singapore and the United States are eyeing Philippine tech companies, aiming to use the youth­ful, tech-savvy, and En­glish-speaking Filipinos as a springboard to jump into other emerging markets, like Indonesia and India.