BDO Capital and Investment Corp., the investment banking arm of the universal lender Banco de Oro, welcomes the entry of foreign competitors in the P5-trillion local lending market as the entire region marches toward financial integration beginning next year.
But BDO Capital President Eduardo Francisco said while the entry of foreign players may be beneficial in the long run, he warned it should not be easy for them to penetrate and exploit the local market.
“When they come in that’s good because they’ll probably come in and focus on large corporates, which is fine,” he said.
He reiterated that getting into retail banking is not that easy for the foreign banks.
“Our contingency plan is we’re just preparing to defend our turf. We just need to be better than them. If they come in, we will definitely survive. When some banks get out and fold, we’re okay buying them,” he told the BusinessMirror. He pointed out BDO acquired many foreign banks that went broke in the past.
“We bought American Express, we bought Banco Santander, we bought Citibank Savings,” he said.
Eleven foreign banks earlier expressed interest to get into and participate in the local market.
Japan’s Sumitomo Mitsui Corp. and South Korea’s Shinhan Bank obtained approval from the Bangko Sentral ng Pilipinas (BSP) to set up a local branch after last year’s full liberalization of foreign bank operations in the country.
“If they only have one branch, they can’t get cheap deposits. If they don’t have many branches, they don’t have the scale. How can you lend money if you have high cost of funding,” Francisco asked rhetorically. He said every year BDO’s loan portfolio expands by P200 billion to P300 billion. This helps make it easy for the bank to follow everywhere their clients go. Still, Francisco said there’s no rush for the bank to expand in other Asean market.
Meanwhile, First Metro Investment Corp. President Roberto Juanchito Dispo said Asean integration is already happening in the areas of trade, commerce, business and in banking.
Of the 11 foreign banks that have expressed interest to come in, three were [South Koreans, two were Taiwanese, two Japanese and two Malaysians.]
“By September Sumitomo Mitsui Bank will open its full banking operations in the country. Mizuho Bank is in close talks to buy Bank of Commerce. CIMB is also looking for potential banking acquisition. The three South Korean banks target to serve the growing [South] Korean community here. Two Taiwanese banks have also expressed interest to get into Philippine banking system.
We’re opening up the banking system and that’s because of banking liberalization and Asean integration,” Dispo said. He said if one adds up the asset sizes of BDO, the Metropolitan Bank & Trust Co., and the Bank of the Philippine Islands (BPI), they will approximate CIMB assets which is the No. 5 biggest bank, in Malaysia.
But banking is not just sizes, according to Francisco.
Philippine banks have adopted Basel 3 regulations and that means the banks are healthier, well capitalized and have stronger balance sheet compared to counterparts in the region.
“We know [local] consumer behavior and [their] buying pattern. By partnering with foreign banks, we will benefit from their technology, products and services. In return, we will show them where to expand and which market to target in their banking expansion,” Dispo said.