Affordable financing drives growth

“Housing demand is always determined by housing finance,” said Januario Jesus Gregorio Atencio, III, 8990 Holdings,Inc. president, in defending  developers’ need to have in-house financing for their projects. 

 Earlier, property consultant KMC-MAG expressed concern about the threat posed by developers’  focus on financing when their expertise is in construction. 

“When you build an econometric model for housing, on top of that is finance. The more accessible housing finance is, the more housing (projects) there will be,” said Atencio. 

“Finance is dictated by affordability. If housing finance is stopped, interest rates are high, entry requirements are high say at 20 percent down payment, then demand will be very small,” he added. 

Antton Nordberg, KMC MAG Group Inc.head of research, said apart from finance not being a core competency of developers, there is also no clear picture on the size of the in-house financing market which remains unregulated. 

“Overall, it’s been increasing quite fast,” he said, noting  the Central Bank’s policy to scale back bank’s lending activity may have also contributed to the rise of in-house financing. 

“Why this is a problem (is because) developers’ core expertise is not necessarily in the financing of products but rather in the development. So there might be some serious underestimate(ion) in the credit worthiness of the home buyer since (this is)  more of risk management than project development,” he added. 

Nordberg, however, was quick to point out that the risk is not an immediate threat. Still this could pose a problem should some external shocks arise. 

“It’s not really an issue right now but if there are some external shocks, it might cause some problem,” he said. 

Atencio said while developers should not be bankers, as KMC-MAG, they will undertake initiatives  to move housing forward. 

Atencio said state-housing fund Pag-IBIG had been successful in lowering the cost of housing for buyers through lower interest rate and lower premiums, making housing more affordable,” 

By ALBERT CASTRO/January 28, 2016/ http://www.malaya.com.ph/business-news/special-features/affordable-financing-drives-growth

Affordable housing finance remains a key in propelling the growth of the housing sector. 

No real estate bubble – BSP

MANILA, Philippines - Initial results of stress tests conducted by banks validated the assessment made by the Bangko Sentral ng Pilipinas (BSP) that there are no risks from the real estate market.

BSP Deputy Governor Diwa Guinigundo said initial results of the real estate stress tests conducted by banks showed the capital adequacy ratio (CAR) of banks would remain above the central bank requirement even if 25 percent of their real estate loan portfolio turns sour.

“At this point we don’t see any signs of stress in the real estate sector,” Guinigundo said.

The central bank has asked banks to submit data on their real estate portfolio to include exposure in socialized housing as well as debt incurred through the issuance of bonds to finance real estate activities.

“We now have a more comprehensive definition of the exposure to real estate. It’s more dependable,” he said.

Based on the new definition of the exposure of banks to real estate, Guinigundo said stress tests conducted by big banks showed that their CAR would still be above the 10 percent requirement set by the BSP and the eight percent threshold set under the Bank for International Standards (BIS).

“Even if they factored in a 25 percent souring of the loans on real estate, they are still above the 10 percent regulatory capital that we imposed on the banks,” Guinigundo said.

Aside from the BIS methodology, he said the BSP also used the International Monetary Fund (IMF) identification of asset bubbles.

“Those two tests will show that we are far from the so-called danger level,” he added.

The CAR of big banks stood at 15.48 percent on a solo basis and 16.42 percent on a consolidated basis as of end-June last year reflecting their continuous efforts to maintain adequate capital buffer against unexpected losses that may arise during times of stress.

The BSP stepped up its watch over the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry.

The pre-emptive macroprudential policy measure approved by the BSP required stress tests for banks to determine if their capital will be enough to absorb credit risk that may arise from their exposure to the property sector.

Banks’ exposure to real estate jumped 21.8 percent to P861.22 billion in end-November from P708.88 billion in end-September last year. The sector accounted for 17.5 percent of banks’ total loan portfolio of P4.91 trillion as of end-November.

The BSP has set the cap on real estate loans at 20 percent of the bank’s total loan portfolio.

Guinigundo added that real estate developers are now more prudent after learning their lessons during the Asian financial crisis in 1997.

“We can also say that we are in touch with various real estate developers, the bigger ones, and it is very comforting to know that our developers have become more prudent, more discreet with respect to their expansion plans,” he said.

Source: By Lawrence Agcaoili (The Philippine Star) / http://www.philstar.com/business/2016/01/12/1541553/no-real-estate-bubble-bsp?nomobile=1

PHL’s young population seen to benefit banking system

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Category: Top News

22 Mar 2014

 

Written by Bianca Cuaresma

THE Philippines’s young population is likely to benefit the Philippines banking system’s loan portfolio in the coming years as a significant part of them are seen to become consumers, the Bangko Sentral ng Pilipinas (BSP) said.

In a recent event, BSP Governor Amando M. Tetangco Jr. said the prospects of consumer financing in the country “remain promising” as the Philippines’s population growth is substantially younger than other countries in the region.

Tetangco, citing World Bank numbers, said that as of end-2012, about 35 percent of Filipinos were younger than 15 years old. This is higher than the rest of the members of the Association of Southeast Asian Nations (Asean), which averaged only 25.8 percent.

Likewise, the country’s 15-below age rate was higher than the developed countries in Asia, particularly China, Japan and South Korea, which only averaged 17.7 percent. Meanwhile, only 19.3 percent of the population of North America was below 15 years old, while the number was still lower in Europe at 15.3 percent.

“What these numbers mean is that the Philippines will see a greater proportion of its population becoming consumers in the next few decades,” Tetangco said.

“This leaves the future market for consumer needs very potent…. Clearly, the demographics favor you,” he added, addressing the thrift bankers in the recently held Chamber of Thrift Banks 2014 National Convention.

Given the bright prospects brought about by the demographic “sweet spot” of the country in the coming years, as well as the upcoming Asean Banking Integration, Tetangco said that banks in the country would have to prepare to be able to reap the benefits of the events that are to take place.

“Unfortunately, the potential that is Asean and our own demographic advantages do not, on their own, create balance sheets. There are still strategic decisions to be made and tactical plans to be executed for these identified positives to be reflected as reality on your balance sheets,” Tetangco said.

The BSP officials earlier said the Asean Banking Integration Framework is seen to commence about five or more years from 2014. 

Bianca Cuaresma

525 new bank branches added to PHL banking system in 2013

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Category: Top News

24 Mar 2014

 

Written by Bianca Cuaresma

More than 500 new bank branches were added to the Philippines banking system last year, as local lenders tried to expand their market reach in preparation for the upcoming regional financial integration.

The local banking industry ended 2013 with a total of 9,935 bank branches nationwide. A total 525 new bank branches were opened during the year.

 The National Capital Region (NCR) still leads the other regions with the most number of bank offices. As of end-December 2013, the nation’s capital region has about a third of the entire physical branch network of the banking industry, with 3,141 branches operating in the area.

This was followed by the Calabarzon region (Cavite, Laguna, Batangas, Rizal and Quezon) with 1,509 bank branches as of end-2013. This was also about 15 percent of the total number of bank branches in the region. Central Luzon, meanwhile, has 998 bank branches as of end last year, or 10 percent of the total bank branches in the region.

The Autonomous Region in Muslim Mindanao (ARMM) has the least number of bank branches in the country with only 21 operating lenders as of end-2013. This was followed by the Cordillera Administrative Region, with only 150 bank branches in total, and by Eastern Visayas, with 183 bank branches.

 In terms of type of lenders, universal and commercial banks still accounted for the largest share of the entire banking system. In particular, there were 5,461 universal and commercial banks in the country. This represented some 55 percent of the total bank branches. This was also 316 branches larger than the 5,145 universal and commercial banks seen in the same period in 2012.

 For the smaller banks in the country, rural and cooperative banks ended the year with 2,646 branches, while thrift banks had 1,828 branches. For thrift banks, as well as for universal and commercial banks, NCR, Calabarzon and Central Luzon still had the most number of bank branches as of end-2013. For rural and cooperative banks, however, Calabarzon, Central Luzon and Western Visayas had the most number of bank branches.

 Earlier, BSP Deputy Governor for the Supervision and Examination Sector Nestor Espenilla Jr. said banks are starting to expand their reach by actively opening up new branches to serve locals. He also said banks were, likewise, trying to open up new branches outside the country to “test their wings” for the upcoming regional integration.

 BSP data showed that there are a total of 51 Philippine bank branches operating overseas as of end-2013. This was larger than the 35 Philippine bank branches seen at end-March 2013.

Dealing with volatility

By Mia E. Abellana

Friday, February 24, 2012

THOUGH the Philippines has promising economic indicators despite the situation elsewhere in the world, officers of a local bank believe volatile markets can still affect sectors that have to deal with foreign entities.

In an economic briefing conducted by Security Bank for clients of Punongbayan and Araullo, foreign exchange and rates hedging division head Raul Victor de Guzman said the global market has never been more volatile than now.

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He noted that with today’s technology, news travels fast and sudden calamities or reports of unrest suddenly have an impact on world economies.

Because markets tend to react quickly and in real time, de Guzman acknowledged that economists and financial experts now find it harder to make forecasts on where economies are headed.

He added that what was once the easy thing to do in a crisis may not always be the best solution these days.

“Before, people just bought dollars. But now, even the idea of the dollar as a safe haven is being questioned. No one wants to accumulate any more dollars,” de Guzman said.

As most developed and emerging economies lost growth last year, he said only two economies managed to grow in 2011: Indonesia and the Philippines.

He said both countries did not rely on their exports to grow. “Economies that are export-led take a hit if the market tanks. They will fall faster than those that are not export-led.”

The downside to this, he said, is if the global economy grows, the country gets left behind.

The Philippines, he said, is a consumption-led economy and he likes to believe the forecast of an international bank that expects the Philippines to be in the top 20 economies by 2050.

Reasons for high consumption are the strong population base. The billions of revenue brought in by overseas Filipino workers’ remittances and the business process outsourcing industry are fueling the consumption.

He believes that the OFWs survived the 2008 global economic crisis when almost everyone was getting laid off because of the kind of workers the country exported. Most OFWs were in the health care and education field, which affected economies needed and did not let go. But overseas workers in real estate and construction did not do so well.

He also said remittances surge even higher in June, as classes begin, and during December. They also noted a spike in remittances whenever catastrophes hit the country.

De Guzman added that this year, they expect the Philippines to see a credit rating upgrade and it could finally reach investment grade status.

He explained that once this happens, the country can expect even more investors putting their money here, instead of in other countries that are facing problems.

He added that some investors, who may already have been interested to invest in the country, may be waiting for the upgrade because of strict company rules about investing only in investment grade entities. He also said the country can borrow funds and pay less interest once it gets to investment grade.

De Guzman said knowing this kind of information can help businesses that have to deal with foreign markets stay safe from market volatility.

Businesses, especially importers and exporters, get jittery when currencies jump from one level to another at differences of P4 to P6.

But if they know market information well enough, de Guzman said they will know when to time their purchases so the rates will be more favorable to them.

With this, de Guzman and senior corporate sales officer Robin Galang introduced some of their products that allow importers and exporters to eliminate the risks of currency changes.

Galang explained that they offer bank products that allowed clients to buy or sell dollars at an agreed price on a future date.

The perks are the clients eliminate all the risks of losing money should the rates change against their favor. The downside is they may not benefit from the extra money should the rates change in their favor. Still, de Guzman said such products allow businesses the benefit of knowing exactly how much they will be paying.

Published in the Sun.Star Cebu newspaper on February 25, 2012.

OFWs remitted P864B, up by 7.2% in 2011

WEDNESDAY, 15 FEBRUARY 2012 22:27 JUN VALLECERA / REPORTER

Money sent home in 2011 by up to 10 million overseas Filipinos ended the year slightly higher than forecast, having actually grown by 7.2 percent to $20.1 billion.

This was an acceleration from the forecast growth of just 7 percent and comes at a time when the political unrest in countries grouped as the Middle East and North Africa or Mena, plus the financial issues hounding the euro area made the target tentative.

For this year, the remittance growth was seen moderating to 5 percent, as consequence of more subdued global outlook.

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Bangko Sentral ng Pilipinas Deputy Governor Juan de Zuniga Jr. said the transfer of all that money helped boost domestic demand and is estimated to have equaled 9 percent of local output or gross domestic product (GDP).

De Zuniga paid tribute to the overseas Filipinos who helped make this possible, saying the remittances “continued to be a major contributor in stimulating domestic demand.”

“Remittances remained resilient throughout the year amid the political turmoil in some parts of the Mena, the slowdown in economic growth and the intensified financial strains brought about by the euro area sovereign debt crisis,” he said.

According to him, the upgraded skills of Filipino workers and the diverse number of countries where they may be found also helped make the remittances resilient in the face of a global slowdown.

Also, contributing to continued resilience was the network of bank and nonbank service providers that were in strategic places for Filipino workers.

The new financial products and money-transfer services offered in the remittance market also helped better capture the global remittances. Zuniga said the continued remittance growth was fueled in part by the 14-percent growth in money transfers made by sea-based Filipino workers and the 5.5-percent growth noted in the remittances of land-based workers. Remittances by land-based workers equaled 78.4 percent of total and the balance made up for by sea-based workers.

BSP data showed overseas Filipinos collectively sending home $1.799 billion worth of foreign currency earnings in December last year alone, the highest during the year.

Continued remittance growth is expected this year, albeit at a slower pace, given the report by the Philippine Overseas Employment Administration that 12.3 percent of total approved job orders of 58,123 or 7,160 have already been processed.

These were service, production, professional, technical and related job categories sought by such countries as Saudi Arabia, the United Arab Emirates, Qatar, Taiwan, Singapore and Kuwait.

Private economists slash inflation forecast

By Lawrence Agcaoili (The Philippine Star) Updated February 06, 2012 12:00 AM

MANILA, Philippines - Private economists further slashed their inflation forecast for the Philippines this year and next on the back of fragile global economic growth due to weaker than expected expansion in advanced economies led by the US and Europe, a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

Based on the BSP’s Private Sector Economists’ Inflation Forecast for the fourth quarter, inflation would average 4.2 percent instead of 4.3 percent this year and 4.1 percent instead of 4.5 percent next year as weak global economic growth would temper inflationary pressures brought about by damages caused by weather disturbances late last year.

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Based on the probability distribution on the forecasts provided by eight out of 11 respondents, there is a 50.7 percent chance that average inflation for 2012 could settle within 4.1 percent to five percent. The BSP has set an inflation target of three percent to five percent between 2011 and 2013.

“Analysts noted that the early part of 2012 could lead to increased inflation pressures due to agricultural constraints as a result of the damage wrought by Typhoon Sendong. Nonetheless, the continuing weak global economic growth could help temper domestic inflationary pressures,” the BSP said.

For 2012, Bank of China and Nomura expect inflation hitting 5.2 percent, followed by Bank of Commerce at 4.8 percent, Banco de Oro at 4.5 percent, Asia ING at 4.4 percent, ATR Kim Eng at 4.3 percent, Metrobank at 4.2 percent, and MIB at four percent.

Rizal Commercial Banking Corp. sees inflation this year averaging between 3.5 percent and 4.1 percent followed by Deutsche Bank at 3.8 percent, Goldman Sachs at 3.7 percent, and think tank IDEA at 3.32 percent.

For next year, the survey showed that ATR Kim Eng and Bank of China see inflation averaging 4.8 percent followed by BDO with 4.7 percent, Asia ING with 4.3 percent, and Metrobank with 4.1 percent. Goldman Sachs and Deutsche Bank expect inflation to hit four percent next year followed by MIB with 3.5 percent, IDEA with 3.1 percent, and RCBC from three percent to four percent.

Latest data from the National Statistics Office (NSO) showed that inflation inched up to 4.4 percent last year from 3.8 percent in 2010, falling within the BSP target of three percent to five percent.

The BSP’s latest inflation report showed that the baseline inflation forecasts reflect a decelerating path, with average headline inflation rates for 2012 and 2013 projected to settle within the three percent to five percent inflation target.

HSBC ‘cautiously optimistic’ on 2012

By Katlene O. Cacho

Wednesday, December 14, 2011

INTERNATIONAL bank Hong Kong Shanghai Banking Corp. (HSBC) said they are “cautiously optimistic” in their projections for 2012, citing effects of the economic problems of Europe and the Unites States on the global economy.

The bank, however, expects more growth to come from Asian markets such as the Philippines.

“We are still waiting for how these two would stabilize their respective economies, particularly the debt crisis in Europe. Although, there is already help being offered…we are seeing risks in terms of resolutions,” HSBC Philippines president and chief executive officer Tony Cripps said in a recent interview.

Cripps said that whatever resolutions would come out in solving Europe’s debt crisis, it would impact the global economy.

But, while on a “wait and see” stance, Cripps reported they are performing well in the Asian region and will focus on further growth in Asian countries like India, Indonesia, Malaysia, Singapore, Sri Lanka and the Philippines.

Cripps reported HSBC Philippines has been performing well this year despite external factors. He credited the bank’s good performance to product diversification and the country’s healthy banking sector.

“The robust growth of HSBC in the Philippines stemmed from the various products we are now offering in the market such as insurance, wealth management, and home loans.

Healthy population dynamics and the stable economy of the country also contributed to the bank’s over-all performance,” Cripps said.

In the past two years, HSBC has already been bullish in giving out home loans in Cebu with the surge of the real estate industry here, according to Debbie Dy Realiza, HSBC Philippines senior vice president and branch banking area head for Cebu and Davao.

“The bank recorded a 100 percent growth in home loans since we started offering it here,” Realiza said.

She reported the bulk of the home loans applications are for houses and lots, while other applications are for condominiums. Realiza said they expect an increase of home loan applications here with the growing property developments.

To strengthen further the bank’s presence in the Philippines, Cripps said HSBC will also invest heavily in electronic banking. The bank also plans to grow its business through more product diversification and aggressive promotions by 2012.

Published in the Sun.Star Cebu newspaper on December 15, 2011.

PH to grow 5%-6%: bank analyst

Thursday, October 27, 2011

DESPITE economic woes in Europe and the United States, the Philippines is still poised to grow by five to six percent between this year and 2012. The country is buoyed by its strong market fundamentals, according to forecasts of the Banco de Oro Universal Bank (BDO).

“We are quite optimistic (with the forecast) but it would be a challenging quarter. This would depend on how the government would institute and aid processes in trying to keep the growth targets,” said Jonathan Ravelas, BDO first vice president and chief market strategist in an economic briefing last Wednesday.

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Ravelas said the growth target is attainable despite the troubled economies of Europe and US. He pointed out that the Philippines has the right market fundamentals which the government could bank on to sustain growth.

“We have a stable exchange and interest rates. Our budget deficit is no longer a problem as we are now starting to see revenues in the government. What the country needs are additional growth drivers,” he said.

Investment

Ravelas suggested that government invest heavily in infrastructure, focus on low energy cost and streamline business processes so it could attract more investments, generate more jobs and increase consumer consumption.

“The challenge now is to mobilize the ample liquidity and take advantage of the low interest rate environment,” he said.

Ravelas reported that there is so much domestic liquidity that can be used to fund big ticket infrastructure and the Aquino administration’s private-public partnership initiatives, but he pointed out that the government should streamline first its processes and identify priority programs.

BDO also forecast inflation to end at 4.7 percent this year. Ravelas warned that the recent calamities in Vietnam and Thailand might affect commodity prices and result in “supply battle” similar to what happened in Japan last March. He noted, however, that the inflation rise is temporary and manageable. The country’s inflation is projected to go down 4.5 percent in 2012.

Ravelas also encouraged consumers to take advantage of the low interest environment.

“Now is the time to borrow,” he said, adding that the current interest rate may stay for at least a year just to facilitate growth but might increase by 2013 or 2014.

Foreign exchange rate, on the other, hand might settle at P38-39 to a dollar over the next two years due to problems in Europe.

“We are looking at a P43.80 to a dollar by the end of the year depending on how Europe will play-out over the next two weeks,” he said.

Ravelas pointed out that an important indicator for recovery is the fourth quarter, when the country expects a surge of remittances, and the purchasing power of Americans and Europeans during the holidays.

He identified agribusiness, consumer durables, construction and real estate, education, health, beauty and wellness; infrastructure, IT-enabled and IT services; logistics and retailing; transport, telecommunications and tourism as “sunrise” industries.

Ravelas admitted, the jobless recovery in the US, debt crisis in the eurozone, Middle East and North African crises and the rising inflation in emerging markets are the challenges to sustain growth.

The global growth rate is forecast to slow down to four percent, he said.

Competitiveness

Meanwhile, Canadian Chamber of Commerce of the Philippines president Julian Payne said that for the country to maximize its growth potential, it should improve its competitiveness.

“The Philippines is in a wonderful position in terms of remittances. It is well protected because of the overseas workers’ diversification. However, as much as the country needs more foreign direct investments (FDIs), it should also improve its ability to compete with neighboring countries,” Payne said.

He said FDIs are needed because they bring in technology and additional money to the country.

“FDIs are here to stay provided that the government will implement the right policies and avoid changes in the middle of the game,” Ravelas said.

Published in the Sun.Star Cebu newspaper on October 28, 2011.