The Market Monitor Minding the Nation's Business
By Jerry Maglunog
When the Bangko Sentral ng Pilipinas (BSP) removed restrictions in opening branches of banks in Metro Manila in July 2014, it changed the competition in unibanking in the country’s main district.
With the liberalization of bank branching, many branches of different banks have sprouted around Metro Manila. Banco de Oro (BDO), Asia United Bank, EastWest Bank and Philippine Bank of Communications (PBCom) are just some of the unibanks that have opened branches in many areas in the metropolis.
“It was restricted for several years because of the presence of so many banks in eight cities in Metro Manila,” BSP Deputy Governor for Supervision and Examination Sector Nestor Espenilla Jr. said in an earlier interview.
The deputy governor said restrictions were removed because it feels that banks’ growth are also muzzled, which is not ideal as integration of banking services is about to happen along with the integration of the Association of Southeast Asian Nations (Asean).
For a fee of P20 million per branch, it seems that the amount is easily afforded by banks based on the new branches they open. In data dug by The Market Monitor, the places where restrictions were lifted are Makati, Quezon City, Pasay, Mandaluyong, Parañaque, Muntinlupa, Manila and Taguig.
Espenilla said that the number of people in Metro Manila just warrants the opening of more bank branches. Metro Manila currently has 13 million people (about 15 percent of the population). “Most of the biggest firms are here and they need to loan to do business,” the deputy governor said.
Senior Monetary Board member Dr. Felipe Medalla said many unibanks are eager to acquire other banks so that they need not to pay P20 million for every branch they want to open. So far, the only successful in acquiring other banks is China Bank.
The bank, a sister of BDO, has acquired Planters Bank, a mid-sized thrift bank, in late 2014.
Converting all the 70-plus Planters Bank into China Bank is currently ongoing. Lamberto Villena, president and chief executive officer of Sterling Bank of Asia (SBA), said opening of more branches is one effective way for a bank to grow.
SBA is one of the fastest-growing thrift banks, according to the Chamber of Thrift Banks, where the bank is one of the most active members. CTB First Vice President Rommel Latinazo said alongside the removal of restrictions of opening new branches is the stiffer competition between them, especially the unibanks.
“If we specialize in consumer loans, commercial loans is the forte of unibanks,” Latinazo, president of Rizal Commercial Banking Corp. Savings Bank, one of the thrift banks of the Yuchengco-led RCBC, said.
A look at the data from the BSP revealed that banks’ total exposure to commercial and consumer loan clients are at staggering P6.7 trillion, or about 92 percent of the Philippines’ total banking assets. A sad part is only less than 1 percent of Philippine banking assets is allotted to micro, small and medium enterprises (MSMEs) at P9.4 billion.
No one from the BSP admitted that based on the loan exposure, it can be concluded that banks promote spending rather than helping those struggling businessmen to gain access to credit.
Unibanks are the biggest among the four classifications of banks as it has the capability to provide loans amounting to hundreds of millions of pesos. Many of these unibanks also have equally big subsidiaries, which some view as detrimental to other businesses because they will be denied of loans.
BDO has SM, SM Prime Holdings; RCBC has EEI, a major contractor; the Mapua Institute of Technology, Malayan Insurance and Grepalife; Metrobank has Federal Land, a super big land development entity; Toyota, hospital (Manila Doctors) school (Tytiana Colleges); PBCom has Puregold, Office Warehouse, Liquigaz and Cosco Holdings; and Bank of the Philippine Islands has Globe, Ayala Land, Ayala Corp. and Honda Philippines.
“The sad part is they will deny many other businesses of loans they are asking because they will become their competitor,” former Federation of Philippine Industries President Jesus Arranza once said.
But Espenilla didn’t comment when asked if unibanking means banks competing with other businesses. “The bottom line is banks are the main vehicles to spur credit and provide loan needs of businesses,” the deputy governor affirmed.