With the financials for the first quarter of the banking industry up, Security Bank has again shown the way in terms of return on equity (ROE) with a market-defining 26.6-percent surge, a low nonperforming-loan (NPL) ratio of 2.8 percent and an improvement in its net income by P835 million, up by 10 percent compared with its year-ago level.

The huge return on stockholders’ equity reveals the bank’s profitability picture, a financial yardstick by which legendary stock picker Warren Buffett, now the world’s richest, subjects firms he buys.

The difficult business environment that the banking industry is in now, arising from the subprime mess that has consigned Depression-era survivor Bear Stearns to the dustbin of economic history, is reflected in the declines in its profitability picture. Bank of the Philippine Islands (BPI) and China Bank had posted ROEs of 9.4 percent and 10.6 percent, respectively, compared with their year-ago performances of 15.3 percent and 15.6 percent. Banco de Oro had 9.1 percent from 11.5 percent while Union Bank had 9 percent from 12.2 percent.

Based on the first-quarter performance of the banking industry that was submitted to the Philippine Stock Exchange, the impact of the subprime mess was very telling on the net incomes. BPI was down by 52 percent to P1.55 billion, Metrobank dropped by 16 percent to P1.75 billion, Chinabank by 7 percent to P714 million, Rizal Commercial Banking Corp. (RCBC) by 7 percent to P773 million, Banco de Oro (BDO) by 24 percent to P1.34 billion and Union Bank by 63 percent to P602 million.

The other big winners in terms of net income aside from Security Bank were Allied Bank and Philippine National Bank (PNB). Allied Bank, which posted a 67-percent increase in net income to P165 million, reported an improvement in its forex gains by P171 million and P276 million in miscellaneous income, as against the rise in its trading losses by P79 million. PNB posted a 48-percent surge in net income to P148 million on a rise in its forex winnings by P328 million and reduction in its operating expenses by P69 million.

Credit for Security Bank’s sterling ROE performance shows in its strong revenue streams and low operating cost. The bank’s cost-to-income ratio is at 42 percent, a two-percentage-point improvement from its year-ago level. In contrast, BPI, which had an operating efficiency of 48 percent in the first quarter last year, ended with 62 percent for the first quarter. Metrobank had an operating efficiency of 61 percent, BDO, 69 percent; PNB, 76 percent; Chinabank, 61 percent; Union, 42 percent and RCBC, 61 percent.

In terms of NPL cover, Security Bank put in a 200-percent NPL cover followed by BDO with 112 percent, Allied, 92 percent; RCBC, 91 percent; Chinabank 87 percent; BPI, 77 percent; Metrobank, 70 percent; and Union, 67 percent.

It is possible that the conservative NPL cover arises from the bank’s focus on what futurists James Taylor and Watts Wacker termed as preparing for the “certainty of uncertainty,” a strategic play by which corporations steel their firms for tectonic shifts such as the subprime mess. For Security Bank president Alberto Villarosa, the bank’s performance had its roots “from a series of strategic initiatives commenced five years ago to purposely drive shareholder value.” Now, that drives shareholder value.

Meralco ‘war’ rages

The media war concerning the Manila Electric Co. (Meralco) rages, this time netting that of the Energy Regulatory Commission (ERC). On Monday night ERC head Rodolfo Albano was fuming over a supposed cruise he took with a Meralco official. Albano challenged his detractors to prove their charges and said he was betting his retirement pay they won’t succeed. It is a fact that all the charges listed on our electric bills were approved by the legislative branch, said Albano, a former ranking member of the House of Representatives.

As the war between the Government Service Insurance System (GSIS) and Meralco intensifies, it is time the public collectively took a stand; there should be no fence-sitters here because we are all electricity users. We understand GSIS is of the view that it cannot win its battle alone, that it should have the backing of electricity consumers, on top of the proxies from Meralco shareholders. 

GSIS president Winston Garcia has clearly stated that the issue is the “mismanagement” by the Lopez family of the country’s biggest electric-distribution company that has resulted in unreasonably high power rates, the highest in Asia and second only to highly industrialized Japan.

The battle is expected to shift gears in the forthcoming proxy fight for Meralco shares. Brokers allied with the GSIS and Garcia, on one side, and Meralco and the Lopezes, on the other, are expected to fight it out for the prized proxies or, if not possible, for the shareholders’ voting rights themselves. There are many ways by which brokers can be enticed to give their proxies to warring groups, and this power play, hinged on power, could power another media war. 

E-mail: hugagni@yahoo.com

As part of our editorial policy, this paper prefers to leave the coverage of crime stories to the tabloids. However, the carnage at the Cabuyao, Laguna, branch of one of the country’s biggest banks on Friday was such an outrage as to compel us to examine the issue of law and order—and how their breakdown affects the conduct of business.

One of the elective courses in the MBA program of De La Salle is Services Marketing. This is one of the school’s responses to the need of the service industry to upgrade its services, as there is hardly any customer orientation among local service companies.

Lost in the controversy surrounding photographs showing the Arroyo couple enjoying a round of golf with ZTE officials is a British High Court decision to reverse a lower-court ruling that secretly filming “a man in his swimming trunks at a swimming pool” violated the 2003 Sexual Offenses Act.

Sway: A much-deserved break for the middle class

Despite public concern over fast-rising consumer prices, the government still opposes the suspension of the value-added tax, or VAT, on fuel and electricity sales.

Emmanuel M. Hizon: Foreign debt caused crisis

Ever since the food and energy crisis came out in the open, a raging debate involving public institutions, big business, and key government officials, including President Arroyo, erupted. Yet, while the exchanges were intense and sometimes dramatic, the substance of the discussions was rather superficial, if not one-dimensional.

Market Files: Security Bank shows way

With the financials for the first quarter of the banking industry up, Security Bank has again shown the way in terms of return on equity (ROE) with a market-defining 26.6-percent surge, a low nonperforming-loan (NPL) ratio of 2.8 percent and an improvement in its net income by P835 million, up by 10 percent compared with its year-ago level.

The Way Forward: Sports and national dynamism

You might think, at first that this piece belongs to the sports section of this paper, but bear with me. There are good reasons why I’m publishing it here.