BPI takes on Japanese partner for leasing business

Bank of the Philippine Islands (BPI) has taken on a Japanese partner to grow its leasing business.

The joint venture, which will be created by Century Tokyo Leasing Corp (CTL) acquiring 49 percent of the shares of BPI Leasing Corp, will be named BPI Century Tokyo Lease & Finance Corp.

“The creation of this joint venture recognizes our success in the Philippine market and its potential for further growth. BPI has a strong track record of partnerships with international financial institutions, like our BPI-Mitsui Sumitomo Insurance partnership for non-life insurance and BPI-Philam for life insurance,” Cezar P. Consing, BPI president and chief executive said.

“We are taking a strong business and making it stronger,” he added.

“We are very pleased to partner with such a well-established and proven company such as BPI on this investment in the Philippines," Shunichi Asada, CTL president and chief executive said.
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"Finding a reliable and recognized Philippine partner will help us serve the Filipino consumers and help realize the potential of the market. I am especially optimistic about the relationship this joint venture enables within CTL’s international business," Asada added.

The joint venture will combine CTL’s resources and expertise with BPI’s proven record of growth and success in the Philippines.

The strategic partnership is taking place at a time of consumer-led growth in the Philippine market. Both companies said their respective clienteles complement each other from "both geographical and sectoral points of view."

The joint venture plans to implement innovations, reach new customers and enhance services to BPI Leasing’s valued customers.

The Ayala-led bank reported a net income of P8.03 billion in the January to June period, down by a third from P12 billion in the same period last year.

Net interest income rose 15 percent year-on-year in the first half as the bank sustained growth in its core business. Net loans jumped 23 percent to P697 billion, while total deposits climbed 30 percent to P1.072 billion, exceeding the P1-trillion mark for the first time.

Despite the drop in earnings, BPI is keeping its full-year profit guidance of P20.21 billion, as the lender sees improved earnings quarter-on-quarter for the rest of the year even amid a rising interest rate environment.

- Interaksyon

BSP ready to unleash more tools to keep banks' real estate bets in check

Monetary authorities are still unperturbed by the rise in domestic banks' exposure to real estate, but they are ready to implement more measures to halt any formation of bubbles in the property market.

In a briefing on Thursday, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo the growth in the exposure of banks to the property sector to 22 percent of their total loan portfolio is not yet worrisome but is "something we need to monitor."

"This is not to say that there is a possibility of an asset bubble in the industry. What you look for is the pricing in terms of capital values, rentals, vacancy rates and occupancy rates of residential units and office space," Guinigundo said.

The central bank official said that so far, vacancy rates for office space have been dipping, which meant that there is still sufficient demand despite the continued construction of buildings within Makati and Ortigas business districts.

Moreover the present levels of capital values and other price indicators in real estate are still lower than what the industry saw in 1997.

In short, there is still no overstretched valuation in the industry, Guinigundo said.

To know where the property sector is going one must look at domestic credit because it "fuels any undue exposure of banks to real estate," he said, adding that the ratio of credit to gross domestic product (GDP) with the long-term trend is still below the threshold level of 2 percent.

Earlier, the BSP said it would order banks to undergo property stress test as property loans and investments rose 6.8 percent to P900 billion in the second quarter of 2013.
Of the total amount of bank credit, P708 billion are composed of property loans, which now make up 18 percent of the total loan portfolio of commercial banks as of March 2014. On average, loan growth to property sector hit 21.2 percent year-on-year in the past 15 months to March 2014.

“Real estate exposure historically has been the trigger of problems in many banking systems. It’s quite natural for regulators including BSP to be particularly wary of this. We’re implementing a risk-based type supervision,” BSP Deputy Governor Nestor Espenilla told Bloomberg.

More measures on the way

Aside from the stress-test to ensure that banks are kept in their proper place, macroprudential measures are already put in place, including the maximum exposure to real estate, loan-to-value and single borrowers' limit. Guinigundo said all of these tools would moderate the kind of credit going into the real estate sector.

"Moving forward, the Monetary Board can always consider additional macroprudential measures, if and when necessary," he added.

Earlier, Jones Lang LaSalle said there might be a slight oversupply of residential units towards the end of the year as six-year-old projects have already been finished.

Again, this is no cause for worry, Guinigundo said, as the market has its own mechanism to correct itself "but the banks have to rethink their credit standards."

- Interaksyon