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PSE’s Sicat to banks: Venture into the stock market

Banks in the country are encouraged to venture into the Philippine stock market while the strong fundamentals of the country continue to fuel the financial sector’s steady and resilient growth this year.

President and CEO Hans Sicat of the Philippine Stock Exchange and Chamber of Thrift Banks (CTB) President Jose Teodoro Limcaoco said the progress of the financial sector is seen to continue in the coming months, as the country demonstrates several positive economic indicators.

“I think the financial industry always performs well when the economy does well. We’re pretty confident that as the economy continues to be strong, GDP [gross domestic product] growth will be resilient, inflation will be under control, and so we are confident the banking sector will [continue to be strong], too,” Limcaoco said at the CTB general membership meeting on Friday.

Sicat also said that based on their review, the banking system would expand this year through more consolidation, increase in capital-raising activities and post robust earnings through the inflow of overseas Filipino workers’ (OFW) remittances and the growth of lending activities.

“The remittance side, given the OFW situation in the Philippines, will continue and thereby will continue to fuel the financial sector in terms of their revenue streams. We also think that the growth in lending will continue with the low interest rate,” Sicat said in his speech in the CTB event.

Industry leaders said that although banks see a challenge in offering loans with the lower interest rates this year, it could still create opportunities for banks to increase the volume of loans and offer new products to the consumers.

“I know that [low interest rates] will not look good in the treasury side of the equation …however, it generates a new level of opportunity for many of the other banks in the sense that [banks] are able to borrow on even cheaper rates and then lend on your typical credit,” Sicat said.

For Limcaoco, who is also the president of Bank of the Philippine Islands (BPI) Family Savings Bank, the banks’ challenge, based on lower interest rates, is good for consumers and borrowers.

“When rates are low, people want to make investments and, therefore, it’s a trade-off for the banks. We will obviously have lower spreads but loans will be healthy. So it’s pricing versus volume—the usual situation. For as long as you can manage your cost, then banks are in a good situation,” Limcaoco said.

With the current upward trend in the overall banking sector and the Philippine financial system, banks are encouraged to list in the stock market to widen the capital base of these banks.

According to Sicat, there are about 30 financial institutions listed in the PSE and so far, 17 of these are banks. Out of these 17 banks, three of them are thrift banks.

Sicat cited developments and the expansion program of the Philippine Savings Bank (PSBank), City­state Savings Bank Inc. and Philippine Business Bank (PBB) as the three thrift banks listed in the PSE. According to Sicat, the aggregate of these three thrift banks weighs about P4 billion with their initial public offerings in the stock market, and the PSE is able to use proceeds for expansion. The PSE also aided in providing initial funding of the banks.

The CTB president also recognized the benefits of being a listed bank, as it provides access to capital that can be used for expansion.

“Listing in the exchange is beneficial in many ways: It provides capital to enterprises and banks that might want it. But also it comes with a responsibility of setting up an infrastructure to comply with the disclosure requirement…and its really access to capital, if banks want to grow, then a listing would provide them the adequate capital,” Limcaoco said.

Sicat said the PSE hopes to see more banks joining the stock market because of the benefits that the PSE can give to the banks despite the recent sell-off in the stock market in the past few days.

“We do hope that actually more thrift banks would consider listing and take a look at the pipeline and the valuation that we are getting—they are quite good despite the recent sell-off,” Sicat said.

Since the last week of May, the PSE index has been trading on a downward level, raising speculations of a massive downfall of the market.

The PSE president, however, shrugged off the sell-off, saying it is just a “global phenomenon” and an “extreme overreaction” to the possible stimulus cut of the United States. He added that the Philippines is fundamentally strong with good data from different economic indicators such as the GDP growth of 7.8 percent in the first quarter of this year and the low inflation rate of 2.6 percent this month.

Sicat also said the good economic indicators and the country’s upbeat competitive rating and investment-grade status entice more investors to come in the Philippines.

“One of the effects of these [good economic fundamentals] is that we are seeing investors who have never been in the Philippines, either direct investors or portfolio investors, actually come in and ask about how do I get into this [the Philippine] market,” Sicat said.

“Last week alone, I met five new, I guess portfolio and direct investors, who have never spent one penny in the Philippines, and clearly that is an indication. I mean, I do spend a lot of time marketing the Philippines. It’s been a great run trying to receive people from all over the world in my office, as opposed to me flying out in New York or London,” he added. Bianca Cuaresma


In Photo: President and Chief Executive Officer of the Philippine Stock Exchange Hans Sicat. (Stephanie Tumampos)


 

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