BANKS’ PROFITS may grow further this year as expectations of elevated benchmark rates until the second half may drive their interest income and as robust economic growth could boost loan demand, analysts said.

“If you’re talking about profitability, higher interest rates will be favorable for them,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

Banks could see their profits grow by 10-15% as economic growth could spur loan demand, Mr. Ravelas added.

As of end-September 2023, the Philippine banking industry’s net earnings climbed by 11.3% to P272.557 billion, driven by higher interest income and lower losses on financial assets, central bank data showed.

“Considering the prevailing high interest rate environment, the outlook for the banking sector appears favorable. Higher interest rates typically boost NIMs (net interest margins), positively impacting banks’ profitability,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“Overall, a cautious but optimistic stance on the banking sector is advisable, given the current macroeconomic backdrop,” he added.

For her part, First Metro Investment Corp. Head of Research Cristina S. Ulang said bank earnings may have already peaked in 2023.

“For investors and traders, profit opportunity lies in share price volatility driven by positive news flow on easing credit conditions and resilient loan growth,” Ms. Ulang said in a Viber message.

“Borrowing would remain to be constrained and banks would also be challenged in profiting from [loans],” Oikonomia Advisory & Research, Inc. President and Chief Economist John Paolo R. Rivera said in a Viber message.

Elevated interest rates could also lead to higher non-performing loans (NPL), he added.

As of end-October 2023, the banking industry’s gross NPL ratio inched up to a five-month high of 3.44% in October from 3.4% in the previous month and 3.41% a year prior.

This was the highest bad loan ratio since 3.46% in May 2023.

The Bangko Sentral ng Pilipinas (BSP) last month kept its policy rate unchanged at a 16-year high of 6.5% for a second straight meeting.

The central bank raised benchmark interest rates by a cumulative 450 basis points from May 2022 to October 2023 to help bring down elevated inflation.

Even as the market expects the Philippine central bank to begin easing its policy stance within this year, BSP Governor Eli M. Remolona, Jr. last month said they are unlikely to cut rates in the coming months and is leaning towards keeping borrowing costs higher for longer until inflation is comfortably within their 2-4% annual target.

In the first 11 months of 2023, headline inflation averaged 6.2%, still above the BSP’s 6% forecast and 2-4% goal for the year, latest government data showed. — A.M.C. Sy

As we embark on the unfolding chapters of 2024, the world of financial technology (fintech) continues its dynamic evolution. This year brings forth a tapestry of trends shaping the industry, with each thread weaving a narrative of digital innovation, regulatory adaptations, and changing consumer landscapes. Let’s delve into these transformative shifts, backed by real-world examples.

One trend is the growth of decentralized finance (DeFi). This continues to dominate the fintech landscape, with platforms like Aave and Compound gaining prominence. These decentralized financial hubs provide lending and borrowing services, enabling users to earn interest or borrow assets without relying on traditional banking systems. Notably, projects like Terra are contributing to financial inclusion by offering stablecoins pegged to local currencies in regions with limited access to traditional banking services. In the Philippines, platforms like BloomX are facilitating decentralized currency exchange, offering users the ability to trade digital assets without the need for traditional intermediaries.

Another is the rise of Central Bank Digital Currencies (CBDCs), which are not just theoretical concepts; they are actively shaping the financial landscape. China’s Digital Currency Electronic Payment (DCEP) stands out as a tangible example, with ongoing pilot programs across various cities showcasing the potential of a government-backed digital currency. Additionally, the Bahamas has successfully implemented the Sand Dollar, demonstrating the practical implementation of a fully operational CBDC. The Philippines is still in the exploratory phase, with the Bangko Sentral ng Pilipinas (BSP) expressing interest in studying the potential implementation of a digital currency.

Artificial intelligence (AI) and machine learning (ML) are another pivotal trend in reshaping financial services. Wealthfront, a robo-advisory platform, employs AI to provide personalized investment advice, highlighting the marriage of technology and finance for individual benefit. On the frontlines of fraud prevention, companies like Feedzai utilize AI for real-time detection, exemplifying the role of technology in safeguarding financial transactions. Coins.ph, a mobile wallet in the Philippines, utilizes AI for fraud detection, ensuring secure and seamless transactions for its users.

Not to be left behind is the continued evolution of contactless payments and digital wallets, which have become integral to our daily transactions. Apple Pay and Google Pay, among others, are now household names. These digital wallets leverage NFC technology for secure and convenient transactions, minimizing the need for physical cash. Biometric authentication, as seen in mobile banking apps like Samsung Pay, further enhances the security of digital payment solutions. GCash and Maya, widely used mobile wallets in the Philippines, facilitate cashless transactions, bill payments, and even investments, contributing to the growing adoption of digital financial services. The convenience and security offered by digital wallets align with the broader global trend.

Sustainable finance and ESG (Environmental, Social, and Governance) investing are likewise gaining traction, with fintech platforms like Aspiration and Clim8 Invest leading the charge. Aspiration offers sustainable banking and investment options, allowing users to align financial goals with environmental and social values. In Europe, Clim8 Invest focuses on sustainable investing, offering a platform that facilitates investments in companies committed to climate change mitigation and environmental sustainability. In the Philippines, fintech platforms like Investree are incorporating ESG criteria into their lending and investment processes, allowing users to make socially responsible financial decisions.

The ongoing growth in fintech comes with its cybersecurity challenges. Companies like Forter specialize in AI-driven fraud prevention solutions, providing advanced tools for the detection and prevention of online transaction fraud. Addressing regulatory compliance is OpenVASP, an open-source project focused on developing a framework for Virtual Asset Service Providers (VASPs) to comply with global regulations related to anti-money laundering (AML) and counter-terrorist financing (CTF). In the Philippines, financial institutions are investing in advanced cybersecurity measures, incorporating AI and ML to detect and prevent fraudulent activities.

In conclusion, the financial technology landscape in 2024 is marked by tangible developments and real-world applications. DeFi, CBDCs, AI, contactless payments, sustainable finance, and cybersecurity are not just concepts but forces actively shaping the way we manage and interact with our finances. Fintech’s journey is one of collaboration between traditional financial institutions and nimble startups, promising a future that is both transformative and inclusive.

The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX.

Reynaldo C. Lugtu, Jr. is the founder and CEO of Hungry Workhorse, a digital, culture, and customer experience transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation. He is the chair of the Digital Transformation IT Governance Committee of FINEX Academy. He teaches strategic management and digital transformation in the MBA Program of De La Salle University. The author may be e-mailed at rey.lugtu@hungryworkhorse.com

THE PESO rose further against the dollar on Thursday as Philippine inflation likely eased last month.

The local unit closed at P55.50 per dollar on Thursday, strengthening by seven centavos from its P55.57 finish on Wednesday, based on Bankers Association of the Philippines data.

The peso opened Thursday’s session steady at P55.75 against the dollar. Its intraday best was at P55.465, while it dropped to as low as P55.78 versus the greenback during the session.

Dollars exchanged dropped to $1.72 billion on Thursday from $1.88 billion on Wednesday.

The peso gained against the dollar on market expectations that headline inflation eased further in December, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine Statistics Authority will release December consumer price index data on Friday.

A BusinessWorld poll conducted last week yielded a median estimate of 4% for December headline inflation, within the central bank’s 3.6-4.4% forecast and slower than 4.1% in November and 8.1% in December 2022.

If realized, December would be the first time that inflation was within the central bank’s 2-4% target and the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the Bangko Sentral ng Pilipinas’ (BSP) baseline forecast.

The continued easing of inflation could prompt the BSP to cut rates within this year, Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. said last month that the central bank will likely keep rates elevated until inflation is comfortably within its 2-4% goal.

The Monetary Board has raised borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

For Friday, Mr. Ricafort expects the peso to range from P56.40 to P55.60 per dollar. — AMCS

TERM DEPOSIT YIELDS slipped on Wednesday amid expectations of slower December headline inflation, which could lead to monetary policy easing this year.

The term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) fetched bids amounting to P368.126 billion on Wednesday, above the P300-billion offering and the P242.295 billion in tenders for the P230-billion offer a week ago.

Broken down, tenders for the seven-day papers reached P203.117 billion, higher than P160 billion auctioned off by the central bank and the P137.115 billion in bids for a P120-billion offering seen the previous week.

Banks asked for yields ranging from 6.5525% to 6.6175%, a wider and lower margin compared with the 6.6% to 6.63% band seen a week ago. This caused the average rate of the one-week deposits to decrease by 1.64 basis points (bps) to 6.5983% from 6.6147% previously.

Meanwhile, bids for the 14-day term deposits amounted to P165.009 billion, above the P140-billion offering and the P105.180 billion in tenders for the P110 billion auctioned off on Dec. 27.

Accepted rates for the tenor were from 6.5625% to 6.65%, lower than the 6.6% to 6.68% margin seen a week ago. With this, the average rate for the two-week deposits dropped by 1.99 bps to 6.6203% from the 6.6402% seen in the prior auction.

The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the 28-day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

Term deposit yields went down on Wednesday as inflation likely eased last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A BusinessWorld poll last week yielded a median estimate of 4% for December headline inflation, within the BSP’s 3.6-4.4% forecast for the month. This is slightly slower than the 4.1% in November but significantly below the 8.1% in December 2022.

If realized, December could mark the first time that inflation met the central bank’s 2-4% target after 20 straight months. It would also be the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the BSP’s baseline forecast.

The Philippine Statistics Authority will release December consumer price index data on Friday.

TDF yields dropped after global crude oil prices hit two-week lows, which could bring inflation down towards the central bank’s 2-4% target in the near term, Mr. Ricafort said, and support rate cuts this year.

At its December meeting, the Monetary Board left its policy rate unchanged at a 16-year high of 6.5% for a second straight meeting.

The central bank raised borrowing costs by a total of 450 bps from May 2022 to October 2023.

The Monetary Board will hold its first policy meeting for this year on Feb. 15.

Markets are also pricing in 150 bps in rate cuts from the US Federal Reserve as early as March or May, Mr. Ricafort added.

The Fed kept borrowing costs unchanged at 5.25-5.5% in December after hiking rates by 525 bps from March 2022 to July 2023. — Keisha B. Ta-asan

THE GOVERNMENT made a full award of the new three-year bonds it offered on Wednesday even as the coupon was higher than secondary market levels following the increase in global crude oil prices amid geopolitical tensions.

The Bureau of the Treasury (BTr) raised P30 billion as planned from the fresh three-year bonds it auctioned off on Wednesday as total bids reached P53.279 billion, almost twice as much as the program.

The bonds were awarded at a coupon rate of 6%. Accepted yields ranged from 5.75% to 6% for an average rate of 5.9%.

The coupon fetched for the tenor was 7.9 basis points (bps) higher than the 5.921% quoted for the three-year bond at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“Bond yields ticked higher this week, tracking the increase in global crude oil prices amid the ongoing conflict in the Red Sea,” a trader said in an e-mail.

The 10-year US Treasury yield briefly popped above 4% overnight for the first time in two weeks before closing at 3.9406%, up 8 basis points on the day, Reuters reported.

Early on Wednesday, oil prices were marginally higher after closing lower on Tuesday. US crude futures drifted 0.1% higher to $70.43 a barrel, after dropping more than 1% on Tuesday, while Brent was flat at $75.86 a barrel.

Iranian-backed Houthis rebels in Yemen have vowed to continue their attacks on shipping in the Rea Sea until Israel halts the conflict in Gaza, and warned that it would attack US warships if the militia group itself was targeted.

Houthi militants fired two anti-ship ballistic missiles into the southern Red Sea, though no damage was reported, the US Central Command said late on Tuesday.

Still, the average rate fetched for the three-year bond was slightly lower than the secondary market level amid expectations that the US Federal Reserve will cut rates as early as March, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message.

The US central bank last month kept the fed funds rate unchanged at 5.25-5.5% for the third straight time after it hiked borrowing costs by 525 bps from March 2022 to July 2023.

Mr. Ricafort added that the lower average rate came as the market expects slower inflation in December.

A BusinessWorld poll last week yielded a median estimate of 4% for December headline inflation, within the central bank’s 3.6-4.4% forecast and slower than the 4.1% in November and the 8.1% in December 2022.

If realized, December would be the first time that inflation was within the central bank’s 2-4% target and the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the Bangko Sentral ng Pilipinas’ baseline forecast.

The Philippine Statistics Authority will release December consumer price index data on Friday.

The BTr wants to raise P195 billion from the domestic market this month, or P75 billion via Treasury bills and P120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy with Reuters

TRANSACTIONS done through the Philippine Payment and Settlement System (PhilPaSS) Plus reached P129 trillion in the third quarter of 2023 amid the increase in settlements between financial institutions.

This was 0.5% higher than the P128.32 trillion in the same quarter in 2022, the Bangko Sentral ng Pilipinas (BSP) said in its report on economic and financial developments in the third quarter of 2023.

PhilPaSS Plus is a real-time gross settlement system that processes and settles high-value transactions between banks through the demand deposit accounts of the lenders maintained with the BSP. The growing number of settlements by financial institutions prompted the BSP to upgrade the PhilPaSS system to PhilPaSS Plus on July 26, 2020.

Meanwhile, the total volume of transactions settled and processed by PhilPaSS Plus climbed 3.22% to 374,986 in the third quarter from the 363,277 seen a year prior.

This, as transactions made through financial market infrastructures (FMIs) and clearing switch operators (CSOs) grew by 10.1% year on year, and transactions between financial institutions (FIs) rose 8.4% annually.

“The increase in FMI and CSO transactions was due mainly to the growth in Delivery vs Payment (DvP)/National Registry of Scripless Securities (NROSS) and automated clearing houses (ACHs) transactions, which expanded year on year by 41% and 8.3%, respectively,” the BSP said.

The central bank said the growth in DvP/NROSS transactions came amid increased transactions in the government securities market as players preferred safer assets due to uncertainties in domestic and external markets.

“Moreover, the increase in ACHs transactions (i.e., transactions done via PESONet and InstaPay) can be attributed to the BSP’s continued efforts in digitalizing retail payments through the launching of Paleng-QR Ph Plus,” it said.

The growth in PESONet and InstaPay transactions can also be attributed to the waiver of transfer fee charges by some banks for transfers of P1,000 and below during the quarter, the BSP said.

“During the third quarter, payments among individuals, corporates, and government accounted for 38.6% of the volume of transactions at the PhilPaSS Plus, followed by transactions made through FMIs and CSOs at 33.8%, and transfers among FIs at 16.3%. The remaining 11.3% came from transactions with BSP units, government collections and payments, and intra-account transfers,” the central bank added.

“In terms of value, transactions with BSP units (68.4%), FMIs and CSOs (18.3%), and payments among individuals, corporations, and government (6.2%) made up about 92.8% of the total value of transactions,” it said.

Meanwhile, the volume of retail transactions — or customer payments to government, businesses, and individuals — stood at 184,240 in the third quarter, down by 0.5% year on year.

On the other hand, transactions via ACHs grew by 8.3% annually.

“The year-on-year growth in ACHs transactions may be attributed to the BSP’s initiatives in promoting digital retail payments across the country, which include among others Paleng-QR, Bills Pay PH, and QR Ph,” the central bank said.

“While there was lesser volume of retail transactions recorded in third quarter of 2023, the total value of transactions in these categories increased to P13.3 trillion, higher by 4.8% year on year,” it added. — K.B. Ta-asan

THE PESO appreciated against the dollar on Wednesday on dovish expectations from the minutes of the US Federal Reserve’s December meeting to be released overnight.

The local unit closed at P55.57 per dollar on Wednesday, strengthening by 10 centavos from the P55.67 finish on Tuesday, based on Bankers Association of the Philippines data.

The peso opened Wednesday’s session weaker at P55.70 against the dollar. Its intraday best was its close of P55.57, while its worst showing was at P55.815 versus the greenback.

Dollars exchanged rose to $1.88 billion on Wednesday from $1.26 billion on Tuesday.

“The peso appreciated amid dovish expectations prior to the release of Fed minutes overnight,” a trader said in an e-mail.

Fed officials in December predicted 75 basis points (bps) of rate cuts in 2024, driving money market bets for around double that amount of cuts that prompted a cross-market year-end rally, Reuters reported.

Futures markets still see a 70% chance of the Fed starting to lower US borrowing costs from their current 22-year high from March.

The US central bank last month kept the fed funds rate unchanged at 5.25-5.5% for the third straight time after it hiked borrowing costs by a cumulative 525 basis points from March 2022 to July 2023.

The Federal Open Market Committee will hold its first policy meeting for the year on Jan. 25-26.

Dovish Fed bets caused the dollar to drop slightly on Wednesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar eased slightly on Wednesday though it stayed near a two-week high, underpinned by a confluence of factors including elevated US Treasury yields and a cautious turn in risk sentiment that weighed on Wall Street, Reuters reported.

Trading was thinned in Asia with Japan out on a holiday, with the greenback paring some of the morning gains over the course of the trading day in the region.

Still, against a basket of currencies, the greenback stood not too far from a two-week top of 102.25 hit on Tuesday, and was last at 102.13.

For Thursday, the trader said the peso could strengthen further as the market expects a slower Philippine inflation print for December. The data will be released on Friday.

The trader sees the peso moving between P55.40 and P55.65 per dollar on Thursday, while Mr. Ricafort expects it to range from P55.50 to P55.70. — AMCS with Reuters

THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Tuesday, even as rates rose across all tenors, amid pent-up demand for debt following the holiday break and with interest rates expected to remain elevated in the near term.

The Bureau of the Treasury (BTr) raised P17 billion via the T-bills it offered on Tuesday, above the initial P15-billion program, as total bids reached P39.945 billion or more than twice the amount on the auction block.

Broken down, the Treasury made a full P5-billion award of the 91-day T-bills as tenders for the tenor reached P13.36 billion. The three-month paper was quoted at an average rate of 5.14%, 14.4 basis points (bps) above the 4.996% seen at the last T-bill auction on Dec. 4. Accepted rates ranged from 5.4% to 5.88%.

The BTr likewise borrowed P5 billion as planned via the 364-day debt papers as bids for the tenor reached P12.225 billion. The average rate of the one-year T-bill went up by 9.7 bps to 5.829% from 5.732% previously. Accepted rates were from 5.498% to 6.7%.

Meanwhile, the government raised P7 billion through the 182-day securities, above the original P5-billion program, as bids for the paper reached P14.36 billion. The average rate for the six-month T-bill stood at 5.578%, jumping by 31.1 bps from the 5.267% quoted the previous auction, and with accepted yields ranging from 5.328% to 5.85%.

At the secondary market on Tuesday, the 91-, 182-, and 364-day T-bills were quoted at 5.244%, 5.518%, and 5.867%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for Treasury bills at today’s auction… The auction was 2.7 times oversubscribed, attracting P39.9 billion in total tenders, prompting the committee to double the accepted volume of non-competitive bids for the 182-day T-bills. With its decision, the Committee raised P17 billion compared to the P15-billion initial program,” the BTr said in a statement on Tuesday.

“The substantial amount of awarded volume today represented some catch-up placements by investors after the prolonged pause in weekly issuances last December,” a trader said in an e-mail on Tuesday.

The Treasury did not hold auctions of government securities after the first week of December after completing its domestic borrowing plan.

T-bill rates rose due to hawkish signals from the Bangko Sentral ng Pilipinas (BSP) chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“T-bill rates moved up from last auction due to lingering expectations of elevated BSP policy rates for the earlier part of the year, which affect local short-term yields,” the trader likewise said.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to cut rates in the coming months and is leaning towards keeping borrowing costs higher for longer until inflation is comfortably within their 2-4% annual target.

The central bank raised benchmark interest rates by a cumulative 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

In the first 11 months of 2023, headline inflation averaged 6.2%, still above the BSP’s 6% forecast and 2-4% goal for the year.

A BusinessWorld poll last week yielded a median estimate of 4% for December headline inflation, within the BSP’s 3.6-4.4% forecast for the month. This is slightly slower than the 4.1% in November but significantly below the 8.1% in December 2022.

If realized, December could mark the first time that inflation met the central bank’s 2-4% target after 20 straight months. It would also be the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the BSP’s baseline forecast.

The Philippine Statistics Authority will release December consumer price index data on Friday.

On Wednesday, the BTr will auction off P30 billion in fresh three-year Treasury bonds (T-bonds).

The Treasury wants to raise P195 billion from the domestic market this month, or P75 billion via T-bills and P120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy

“We are expanding our regional play and deploying to more provincial areas.  That said, we will maintain our urban and peri-urban track to reach Gen Zs and millennials,” GoTyme Bank Co-Chief Executive Officer (CEO) and Chief Commercial Officer Albert Raymund O. Tinio said in an e-mail last month.

The bank’s customer base is expected to continue growing this year, even as inflation and interest rates remain high, Mr. Tinio added.

“Customers will continue to look for a simple, straightforward approach to meet their financial transaction needs. Our commitment to human digital banking doesn’t end just because interest rates change,” he said.

The digital lender on Dec. 22 reached its end-2023 target customer base of two million, 14 months after it began commercial operations.

GoTyme Bank President and CEO Nathaniel D. Clarke said this was driven by the bank’s competitive savings interest rate and debit program.

This also came despite the economic headwinds the country faced during the year, he added.

“There is huge pent-up demand for a preferred banking experience that has previously been reserved for the top 5% of the population. Because of this, we are quite insulated from the macro environment,” he said.

GoTyme Bank’s product base will continue to expand this year to support customer growth, Mr. Clarke added.

“In the first half of 2024, we plan to launch several new investment products to include term savings and equities trading,” he said.

The online lender will also launch a buy now, pay later product, and will expand the micro, small, and medium enterprise loan product that it launched in partnership with PayMongo in November.

It is also planning to launch a person-to-person quick response or QR payment feature in February 2024, as well as an earned wage access payroll lending product, it previously said.

GoTyme Bank is a partnership between the Gokongwei group, which holds a 60% stake, and Singapore-based digital banking group Tyme, which has 40%.

It is one of the six online banks that got licenses to operate from the Bangko Sentral ng Pilipinas. — A.M.C. Sy

THE VALUE of coins collected though the coin deposit machines (CoDMs) of the Bangko Sentral ng Pilipinas (BSP) reached P297.78 million as of Dec. 15, the central bank said in a social media post on Tuesday.

This was 39.8% higher than the P212.94 million coins seen a month prior, central bank data showed.

A total of 93.62 million pieces of coins were deposited in the machines, up by 30.7% from the 71.62 million coins recorded a month before, the BSP said.

There were also 89,690 transactions made through the machines as of Dec. 15. 

The BSP and its retail partners launched the CoDMs earlier in June to promote efficient coin recirculation in the country. 

Through the project, the central bank aims to address the artificial coin shortage in the financial system and help ensure that only fit and legal tender currency is available for public use through the project. 

The BSP has deployed 25 coin deposit machines in retail establishments across Metro Manila and other nearby provinces in partnership with Filinvest Lifemalls Corp., Robinsons Supermarket Corp., and SM Retail, Inc.

All denominations of the BSP Coin Series and New Generation Currency Coins Series are accepted by the coin deposit machines.

Unfit and demonetized coins, foreign currency, and foreign objects are rejected by the machine and returned to the depositor.

The value of coins deposited in CoDMs may be credited to the depositor’s e-wallet account or converted into a shopping voucher for over-the-counter transactions.

The rollout of the machines in select retail establishments of the SM Store, Robinsons Supermarket, and Festival Mall is part of the first phase of the project’s implementation.

The BSP will determine if the project will be expanded to other regions and if the number of machines will be increased after one year. — Keisha B. Ta-asan

THE PESO dropped on the first trading day of 2024 as remittance flows eased after the holidays and as the dollar gained versus major currencies.

The local unit closed at P55.67 per dollar on Tuesday, weakening by 30 centavos from P55.37 on Friday, based on Bankers Association of the Philippines data.

The market was closed on Monday for New Year’s Day.

The peso opened Tuesday’s session weaker at P55.45 against the dollar. Its intraday best was at P55.44, while its worst showing was its close of P55.67 versus the greenback.

Dollars exchanged went down to $1.26 billion on Tuesday from $1.32 billion on Friday.  

The peso dropped against the dollar after remittances slowed as the holiday season ended, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso was also dragged down by a stronger dollar following a rise in global crude oil prices amid escalating tensions in the Red Sea, Mr. Ricafort added.

The dollar crept higher on the first trading day of the year as attention turned to economic data this week that may provide clues on the US Federal Reserve’s next moves, Reuters reported.

The dollar index, which measures the US currency against six rivals, fell 2% in 2023, snapping two years of gains. It was last at 101.44, up 0.059%, as investors weighed the prospect of the Fed cutting rates this year.

The dollar’s ascent weighed on the Japanese yen the most, with the Asian currency down by 0.35% at 141.36 per dollar, having slid 7% in 2023.

Markets are now pricing in an 86% chance of interest rate cuts from the Fed to start from March, according to CME FedWatch tool, with over 150 basis points of easing anticipated in the year.

Meanwhile, oil prices jumped on Tuesday, with Brent crude futures and US West Texas Intermediate crude futures each rising roughly 2%, due to potential supply disruptions in the Middle East after a naval clash in the Red Sea, among other things.

Brent gained $1.56 to $78.59 a barrel, while US crude rose $1.28 to $72.93.

“The peso depreciated on bargain hunting ahead of a likely uptick in the US manufacturing PMI (purchasing managers’ index) for December 2023,” a trader said in an e-mail.

For Wednesday, the trader said the peso could weaken further ahead of the release of US jobs data this week.

The trader sees the peso moving between P55.55 and P55.80 per dollar on Wednesday, while Mr. Ricafort expects it to range from P55.55 to P55.75. — A.M.C. Sy with Reuters

The government will auction off P15 billion in Treasury bills (T-bills) on Tuesday or P5 billion each in 91-, 182-, and 364-day papers.

On Wednesday, it will offer P30 billion in fresh three-year Treasury bonds (T-bonds).

T-bill rates may track the mixed movements of comparable secondary market yields as the Bangko Sentral ng Pilipinas (BSP) remains hawkish while the US Federal Reserve is widely expected to begin cutting rates this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the rates of the 91- and 364-day Treasury bills (T-bills) rose by 8.59 basis points (bps) and 4.56 bps week on week to 5.2438% and 5.8674%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the 182-day T-bill fell by 0.55 bp to yield 5.5178%.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to cut benchmark interest rates in the next few months and is leaning towards keeping borrowing costs higher for longer.

The BSP will only begin policy easing if inflation settles within a “comfortable” range or the midpoint of its 2-4% target band, Mr. Remolona said.

The central bank raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

Meanwhile, the US central bank last month kept the fed funds rate unchanged at 5.25-5.5% for the third straight time after it hiked borrowing costs by 525 bps from March 2022 to July 2023.

Markets expect the Fed to start monetary easing as early as March and cut rates by up to 150 bps this year.

On the other hand, the three-year T-bond could fetch rates of 5.75-5.875% as the market awaits the release of December inflation data, a trader said in an e-mail.

At the secondary market, the three-year paper saw its yield go down by 1.52 bps week on week to 5.9203%, BVAL data showed.

Headline inflation likely settled within 3.6%-4.4% in December, the BSP said last week.

If realized, the upper end of the forecast would be faster than the 4.1% print in November but slower than the 8.1% seen a year ago.

Meanwhile, the lower end would be the slowest pace and the first time the monthly print would be within the BSP’s 2-4% target range since February 2022’s 3%.

The Philippine Statistics Authority will release December consumer price index data on Friday.

The BTr wants to raise P195 billion from the domestic market this month, or P75 billion via T-bills and P120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy

OUTSTANDING LOANS granted by banks’ foreign currency deposit units (FCDU) inched up as of end-September 2023 from the previous quarter, as disbursements exceeded principal repayments.

Loans granted by the FCDUs of banks went up by 0.7% to $15.5 billion as of September from $15.39 billion at end-June, the Bangko Sentral ng Pilipinas (BSP) said in a statement late Friday.

Year on year, outstanding FCDU loans declined by 1.1% from $15.67 billion.

FCDUs are BSP-approved bank units that perform transactions involving foreign currencies, including deposits and loans.

Gross disbursements rose by 18.8% to $17.1 billion as of September from $14.4 billion as of end-June due to higher funding requirements of a foreign bank branch affiliate, the BSP said. 

Loan repayments also increased by 17.4% to $17 billion from end-September, which resulted to an overall net disbursement.

The bulk of banks’ FCDU loan portfolio was made up of medium- to long-term debt, or those payable in more than a year, which stood at $12.032 billion and made up 77.6% of the total. This was lower than the previous quarter’s 78.3% share.

FCDU loans granted to residents amounted to $9.396 billion or 60.6% of the total loans at end-September, with $9.274 billion of this amount (59.8%) going to private firms.

Most of these loans went to power generation companies ($2.4 billion or 25.3%), merchandise and service exporters ($2.3 billion or 24.5%), and towing, tanker, trucking, forwarding, personal and other industries ($1.3 billion or 13.5%). 

FCDU loans to nonresidents totaled $6.105 billion during the nine-month period.

Meanwhile, FCDU deposit liabilities increased by 5.7% to a fresh record high of $51.8 billion as of end-September 2023 from $49 billion in the previous quarter.

“The bulk of these deposits ($50.4 billion or 97.3%) continued to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves,” the BSP said.

Year on year, FCDU deposit liabilities went up by 6% from $45.8 billion at end-September 2022.

The overall FCDU loans-to-deposit ratio stood at 29.9% in the January-to-September period, down from the 31.4% recorded at end-June and the 34.2% seen a year prior. — Keisha B. Ta-asan

YIELDS on government securities (GS) rose slightly last week as the shortened trading period caused investors to pocket their gains and position before the year ended.

Rates, which move opposite to prices, went up by an average of 1.09 basis points (bps) week on week, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Dec. 29 published on the Philippine Dealing System’s website.

Yields at the short end of the curve mostly went up last week, with rates of the 91- and 364-day Treasury bills (T-bills) rising by 8.59 bps and 4.56 bps to 5.2438% and 5.8674%, respectively. Meanwhile, the 182-day T-bill fell by 0.55 bp to yield 5.5178%.

At the belly of the curve, yields on the two-, three-, and four-year Treasury bonds (T-bonds) declined by 1.83 bps (to 5.914%), 1.54 bps (5.9049%), and 0.49 bp (5.9144%), respectively. On the other hand, the rates of the five- and seven-year T-bonds rose by 0.95 bp (to 5.9386%) and 3 bps (to 5.9892%), respectively.

Rates of tenors at the long end mostly went down. Yields on the 20- and 25-year debt papers declined by 3.8 bps (to 6.0821%) and 0.4 bp (6.1241%), respectively. Meanwhile, the 10-year T-bond saw its rate rise by 3.47 bps to 6.0012%.

Total GS volume traded on Friday fell to P14.06 billion from P22.51 billion on Dec. 22.

Yields were mostly mixed last week as buying flow was met with sellers taking profits on earlier positions, Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said in an e-mail.

“Such activity led to a quiet pause ahead of the new year and a new year auction,” Mr. Reyes said.

While the Bangko Sentral ng Pilipinas (BSP) has not signaled when it will pause, the US Federal Reserve’s easing hints led to “a sold rally of long-dated tenors for both the dollar and peso government bonds, flattening both curves,” he added.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to deliver any benchmark interest rate cuts in the next few months and is leaning towards keeping borrowing costs higher for longer. 

The BSP will only begin policy easing if inflation settles within a “comfortable” range or the midpoint of its 2-4% target band, Mr. Remolona said.

The central bank raised borrowing costs by a total of 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

The BSP has said inflation could settle within the 2-4% target in the first quarter of 2024 but could overshoot the target again from April to July partly due to the El Niño weather event.

In the first 11 months of 2023, headline inflation averaged 6.2%, still above the BSP’s 6% forecast and 2-4% target for the year.

Meanwhile, the Fed last month kept borrowing costs unchanged at 5.25-5.5% for the third straight time. This was after it hiked policy rates by 525 bps from March 2022 to July 2023.

Markets expect the US central bank to begin easing its policy stance as early as March, with investors penciling in cuts worth up to 150 bps this year.

On the other hand, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said, “the last trading week of 2023 [saw] PHP BVAL yields mixed [with] little change, after declining for most weeks since November.”

“Government yields declined broadly for the year as domestic inflation retreated from historic highs at the end of 2022,” a bond trader added in an e-mail.

Trading volume remained muted due to the holiday season and as investors look forward to policy rate cuts from the BSP and US central banks by 2024, the trader said.

GS yields will remain influenced by the BSP’s policy guidance and the Fed as market participants continue to expect policy easing in 2024, the bond trader added.

Mr. Reyes said that “since inflation started to trend lower, yields too have come off in anticipation of the BSP pause which till now is expected to occur anytime till March 2024.”

“[For the coming weeks,] we expect a positive run on both curves with yields coming off and steepening the slope,” he added. — A.C. Abestano

THE PESO is seen moving within the P54 to P57 level against the dollar this year amid expectations of monetary policy easing at home and in the United States, and with markets watching oil prices to anticipate inflation trends.

The local currency closed at P55.37 versus the dollar on Friday, appreciating by 11 centavos from Thursday’s P55.48 finish, data from the Bankers Association of the Philippines’ website showed.

Dec. 29 was the last trading day for 2023. For the year, the peso appreciated by 38.5 centavos or 0.7% from its P55.755-per-dollar close at end-2022.

Meanwhile, week on week, the peso gained three centavos from its P55.40 close on Dec. 22.

The peso appreciated against the dollar this year amid the decline in global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Easing crude prices could reduce the country’s oil import bill and narrow the country’s trade deficit, as well as help bring down inflation towards the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target, Mr. Ricafort said.

For this year, the peso could trade between P54 and P57 versus the dollar, with oil price movements and their effect on inflation to be a main trading driver, he said.

The US Federal Reserve and the BSP’s possible rate cuts this year amid expectations of slowing inflation will also affect foreign exchange trading, he added.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to deliver any benchmark interest rate cuts in the next few months and is leaning towards keeping borrowing costs higher for longer.

The BSP will only begin policy easing if inflation settles within a “comfortable” range or the midpoint of its 2-4% target band, Mr. Remolona said.

The central bank raised borrowing costs by a total of 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

Meanwhile, the US central bank last month kept borrowing costs unchanged at 5.25-5.5% for the third straight time. This was after it hiked policy rates by 525 bps from March 2022 to July 2023.

Markets expect the Fed to begin easing its policy stance as early as March, with investors penciling in cuts worth up to 150 bps this year.

“Despite persistence of current account deficits, more peso strength can be seen in 2024 as global easing cycles typically underpin EM (emerging markets) currency gains,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said in a Viber message.

The BSP will likely “cap the peso’s appreciation” and keep it at the P54 level as the difference between the Fed and the BSP’s key rates begin to widen, Mr. Neri added.

Still, the peso could climb to the P53 level if the Fed cuts earlier and by bigger increments than market expectations, Mr. Neri added.

For this week, Mr. Ricafort said the peso could trade between P55.20 and P55.70 per dollar. — AMCS

CHINA BANKING Corp. (China Bank) expects its loans to continue growing at a high single-digit pace next year, in line with the expansion seen for 2023, as interest rates are seen to remain elevated until the fourth quarter of 2024, a senior official said.

“China Bank’s gross loans will continue to grow at a measured pace at high single digits. Several factors can stir loan growth, like sustainability of consumer spending, and business expansions, as well as government infrastructure projects,” China Bank Chief Finance Officer Patrick D. Cheng said in an e-mail.

Still, the expected pace of loan growth for this year and next would be slower than the 15% recorded in 2022, he said.

China Bank will lean on its consumer business to support continued credit expansion, Mr. Cheng said.

“Our objective is to increase our consumer loan ratio from 20% to 25% over the next five years while still maintaining growth in our corporate loan book,” he said.

“China Bank will maintain a conservative approach to managing its asset quality. The NPL (non-performing loan) ratio is projected to stay below the industry average, while NPL coverage will still be above 100%,” Mr. Cheng added.

The Sy-led bank expects the Bangko Sentral ng Pilipinas (BSP) to maintain its target reverse repurchase rate at a 16-year high of 6.5% and only begin easing its policy stance in the fourth quarter of 2024 amid lingering upside risks to inflation, China Bank Chief Economist Domini S. Velasquez said.

Lower benchmark rates could help bring its margins closer to the 4% level in the near term, Mr. Cheng said.

“Any expected drop in the yields will offset lower funding cost,” he added.

China Bank’s net interest margin stood at 4.24% at end-September.

The BSP kept its policy rate steady for the second straight time at its last policy meeting for the year earlier this month. The interest rates on the BSP’s overnight deposit and lending facilities were likewise kept at 6% and 7%, respectively.

BSP Governor Eli M. Remolona, Jr. said the Monetary Board kept its stance unchanged as “the balance of risks to the inflation outlook still leans significantly toward the upside,” due to potential pressures from rising transport, electricity and fuel prices, as well as the El Niño weather phenomenon.

“With the sum of recent information, the Monetary Board continues to see the need to keep monetary policy settings sufficiently tight to allow inflation expectations to settle more firmly within the target range… Going forward, the BSP remains ready to adjust monetary policy settings as necessary, in line with its mandate to ensure price stability,” Mr. Remolona said.

The Monetary Board has raised benchmark interest rates by a cumulative 450 basis points since it began its tightening cycle in May 2022 to help bring down inflation.

Philippine headline inflation eased to 4.1% in November from 4.9% in October and 8% in November 2022.

For the first 11 months, the consumer price index averaged 6.2%, faster than 5.6% in the same period a year ago. This is still above the BSP’s 2-4% target for 2023.

China Bank’s attributable net income grew by 16.47% to P5.35 billion in the third quarter amid continued growth in its core businesses and lower loan loss provisions. — A.M.C. Sy

PRU LIFE Insurance Corp. of UK (Pru Life UK) booked a premium income from variable life insurance products of P34 billion as of end-September, driven by its “innovative” offerings.

“Pru Life UK’s continued market leadership can be attributed to the steadfast dedication of its 40,000 digitally empowered agency force, the largest in the insurance industry in the Philippines serving over 1.7 million Filipinos and families,” Pru Life UK said in a statement on Thursday.

The company also saw its New Business Annual Premium Equivalent (NBAPE) rise by 15.8% year on year to P7.99 billion in the first nine months of 2023, Pru Life UK said, citing data from the Insurance Commission (IC).

This was faster than the industry’s 13.93% growth to P46.57 billion at end-September.

“NBAPE is the standard metric used globally to evaluate the sales performance of the life insurance industry in the Philippines,” Pru Life UK said.

The company noted that it led the industry in terms of both NBAPE and total renewal premium income from variable life insurance products during the period.

“We are blessed to continue leading the industry and being the top choice of our customers. Our heartfelt gratitude goes out to our clients, employees, agency force, and partners,” Pru Life UK Executive Vice-President and Chief Financial Officer Francis P. Ortega said.

“We further strengthen our unwavering PRU Love and commitment to being the most trusted partners for every life, and protectors for every future of many Filipinos and families today and in the years to come,” he added.

The premium income of life insurance companies grew by 13.93% to P229.89 billion at end-September, data from the IC showed.

The sector’s net income stood at P28.79 billion during the period, up by 10.32% from P26.10 billion last year. — AMCS

Alvin forecasts that economic conditions will be slightly better in 2024, with GDP growth at 5.7%. Inflation is expected to be under control at 4.5% amid favorable initiatives from the government, such as ensuring adequate agricultural buffer stocks and the extension of the reduced tariff rates on key commodities. Consumer spending will be more robust and contribute further to the economy. The Bangko Sentral ng Pilipinas will likely cut interest rates, making it less expensive for companies to finance their capital expenditures. Consequently, capital formation will likely expand at a better rate in 2024. With the likely end of the rate hike cycle, expect the peso to remain relatively manageable and trade at a range of P54.50-57.50. Key risks, says Alvin, are the emergence of new supply shocks, the possibility of a harsher El Niño, and the escalation of tensions between the Philippines and China may dampen business and consumer confidence.

At our Christmas family reunion, IT and Business Process Association of the Philippines President Jack Madrid (married to my niece Belinda Gozon) talked passionately about the IT-BPM sector as a bright spot.

He said the industry grew to 255,000 new jobs during the pandemic, ending 2023 with 1.7 million employees. This is seen to cross the 2 million level by 2025. More than 54% of the growth will come from the countryside, such as Iloilo, Davao, Cagayan de Oro and Laoag. To continue being a golden goose of the Philippine economy, upskilling and reskilling is needed, as it is an indispensable pillar, contributing $35 billion or 8% of GDP.

Speaking of family, my brother Felipe “Henry” Gozon, chairman and CEO of GMA Network, Inc., recently celebrated his birthday with full gratefulness to the Lord. Maritess, the youngest daughter, said her dad is an enigma — a multidimensional personality yet an authentic person. A lawyer, he took the helm of GMA, known as “Popeye station,” with no business experience and yet managed to make GMA number one. He is not perfect, despite his famous saying “I may not be always right, but I am never wrong.” Son Philip said his dad is a strict chairman and CEO who demands perfection. Having him as a boss can be both intimidating and rewarding. One trait, Philip says, that stands out is his integrity. He pays particular attention to the news, making sure “walang kinikilingan, walang pinoprotektahan, walang kasinungalingan, laging totoo lamang.”

Henry takes pride in his family, and who wouldn’t? His children Annette and Philip are both lawyers with masters from Harvard Law School, and Maritess is a medical doctor from UP. All three were top in their class; when they were young, someone remarked, “they probably have brains even in their cheeks.” The grandchildren are closely following their parents’ footsteps.

This year, Henry faced a significant challenge when his wife Tessie had a health crisis. The imposing husband turned into a caring and soft-hearted one. For the first time, Henry was vulnerable and unsure of what to do. Tessie recovered, and at the party, Henry openly acknowledged that Tessie, his UP sweetheart for 11 years, is his true love. As a sister-in-law, I can attest to Tessie’s goodness, and she is truly the “perfect wife” for Henry.

Henry turned to God and read the Bible again. He started a Sunday Bible study with his family to instill love and fear of the Lord, fully surrendering to God’s will. Our Nanay Arling (Carolina Lapus Gozon) is smiling in heaven. She taught us to know that Jesus Christ is the most important as He is the Savior and the Source of Everything. Henry believes that whoever sees God’s hand in everything can leave everything in God’s hand. Maritess says the blueprint of his dad’s success is his legacy: “Do the best you can and leave the rest in God’s hands.”

Henry is stepping down as GMA CEO but remaining as chairman and adviser. Congratulations to the new CEO Jimmy Duavit and Joel Jimenez, new executive committee chair!

This Christmas, with the birth of the Lord Jesus Christ, we have received the greatest gift ever. Let us look forward to a great 2024 with God in the center of our lives.

The views expressed herein are her own and do not necessarily reflect the opinion of her office as well as FINEX.

Flor G. Tarriela was former PNB chairman and now serves as board adviser. A former undersecretary of Finance, she is lead independent director of Nickel Asia Corp., director of LTG, Inc. and FINEX. A gardener and an environmentalist she founded Flor’s Garden in Antipolo, now an events destination.

THE PESO rose against the dollar on Thursday amid easing global crude oil prices and a weaker greenback.

The local unit closed at P55.48 per dollar on Thursday, strengthening by seven centavos from its P55.55 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session weaker at P55.65 against the dollar. Its intraday best was at P55.48, while its weakest showing was at P55.69 versus the greenback.

Dollars exchanged fell to $1.03 billion on Thursday from $1.53 billion on Wednesday.

The peso strengthened on Thursday due to falling global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso appreciated tracking the decline in international oil prices amid concerns on the global economic outlook,” a trader likewise said in an e-mail.

Oil prices were subdued having slid on Wednesday as concerns over supplies eased after major shippers announced they would return to the Red Sea, Reuters reported.

Brent edged up 10 cents to $79.75 a barrel, while US crude fell 3 cents to $74.08 per barrel.

The peso was supported by a weakening dollar amid market expectations of rate cuts by the US Federal Reserve next year, Mr. Ricafort added.

The dollar nursed steep losses on Thursday and was headed for a yearly decline on expectations that 2024 will bring deep rate cuts, Reuters reported.

The dollar index, which measures the US currency against six rivals, fell to a fresh five-month low of 100.76. The index is on course for a 2.6% decline this year, snapping two straight years of strong gains.

Investor focus remains on the timing of the interest rate cuts from the Federal Reserve, with markets pricing in an 88% chance of a cut in March 2024, according to CME FedWatch tool. Futures imply more than 150 basis points of Fed easing next year.

For Friday, the trader said the peso could strengthen further amid year-end demand for the currency.

The trader sees the peso moving between P55.35 and P55.60 per dollar on Friday, while Mr. Ricafort sees it ranging from P55.35 to P55.55. — AMCS with Reuters

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday despite hawkish signals from the central bank chief recently as investors expect rate cuts in the United States next year.

The central bank’s term deposit facility (TDF) attracted bids amounting to P242.295 billion on Wednesday, above the P230 billion on the auction block. However, this was below the P324.325 billion in tenders seen a week ago for the same offer volume as the 14-day tenor went undersubscribed on Wednesday.

Broken down, tenders for the seven-day papers reached P137.115 billion, higher than the P120 billion auctioned off by the central bank but lower than the P194.105 billion in bids last week.

Banks asked for yields ranging from 6.6% to 6.63%, a tad narrower than the 6.6% to 6.65% band seen a week ago. This caused the average rate of the one-week deposits to decline by 1.82 basis points (bps) to 6.6147% from 6.6329% previously.

Meanwhile, bids for the 14-day term deposits amounted to P105.18 billion, below the P110-billion offering and the P130.22 billion in tenders seen on Dec. 20.

Accepted rates were from 6.6% to 6.68%, slightly wider than the 6.625% to 6.68% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 1.61 bps to 6.6402% from the 6.6563% logged in the prior week’s auction.

The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the 28-day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields went down despite signals of “higher for longer” rates from the BSP chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message, as market players continue to expect 150 bps in rate cuts from the US Federal Reserve as early as March 2024.

These cuts could be matched locally amid easing inflation in the Philippines, Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. last week said the central bank is unlikely to deliver any benchmark interest rate cuts in the next few months and is leaning towards keeping borrowing costs higher for longer.

The BSP will only begin policy easing if inflation settles within a “comfortable” range or the midpoint of its 2-4% target band, Mr. Remolona said.

The central bank raised borrowing costs by a total of 450 bps from May 2022 to October this year, bringing the policy rate to a 16-year high of 6.5%.

The BSP has said inflation will settle within the 2-4% target in the first quarter of 2024 but could overshoot the target again from April to July partly due to the El Niño weather event.

In the first 11 months of 2023, headline inflation averaged 6.2%, still above the BSP’s 6% forecast and 2-4% target for the year.

Meanwhile, the US central bank kept borrowing costs unchanged at 5.25-5.5% for the third straight time earlier this month. This was after it hiked policy rates by 525 bps from March 2022 to July 2023.

Markets are now pricing in a 79% chance of a rate cut starting in March 2024, according to CME FedWatch tool, with over 150 bps of cuts priced in for next year, Reuters reported. — Keisha B. Ta-asan with Reuters

TRANSACTIONS made through PESONet and InstaPay continued to climb as of end-November, with the combined value breaching P11 trillion, amid the fast adoption of electronic fund transfers, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The combined value of transactions done via automated clearing houses PESONet and InstaPay increased by 30.3% to P11.6 trillion at end-November from P8.9 trillion in the same period in 2022.

In terms of volume, transactions via the two payment systems climbed by 44.8% to 824.856 million in the same period from 569.665 million transactions a year prior.

“The consistent expansion of InstaPay and PESONet transactions may be attributed to several factors, including convenience, accessibility, cost-effectiveness, and security,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Broken down, the value of transactions done via PESONet rose by 23.1% to P7.08 trillion in the January-to-November period from P5.75 trillion a year ago.

The volume of transactions coursed through the gateway stood at 83.3 million in the period, rising by 8% from 77.1 million the prior year.

Meanwhile, the value of transactions done through InstaPay grew by 41.9% year on year to P4.47 trillion in the first 11 months of 2023 from P3.15 trillion in the same period last year.

The volume of InstaPay transactions also surged by 50.6% year on year to 741.6 million from 492.5 million previously. 

PESONet and InstaPay are automated clearing houses under the central bank’s National Retail Payment System, which was launched in December 2015 to promote a safe, efficient, affordable, inclusive and reliable retail payments system.

PESONet caters to high-value transactions and is considered as an electronic alternative to paper-based checks.

On the other hand, InstaPay is a real-time electronic fund transfer facility for low-value transactions of up to P50,000.

“With the holiday season, increased gift-giving, early shopping, and bill payments, online fund transfers are poised to experience further growth,” Mr. Roces said.

“InstaPay and PESONet’s role in making money transfers more convenient and accessible is helping foster financial inclusion and boosting economic activity,” he added.

The BSP has encouraged the public to consider using digital means in sending cash gifts during the holiday season as this is “a safer and more convenient way of gift-giving for both the givers and the recipients.”

“There are 324 million e-money accounts in the Philippines as of end-September 2023. These accounts may be conveniently used for paying digitally for goods and services as well as for monetary gifts,” the central bank earlier said. 

The increase in PESONet and InstaPay transactions is expected to help the BSP achieve its twin goals to have 50% of retail payments done digitally and 70% of adult Filipinos as part of the formal financial system by the end of this year. — Keisha B. Ta-asan

THE CENTRAL BANK has approved Bank of the Philippine Islands’ (BPI) plan to raise its authorized capital stock by P4 billion in preparation for its merger with Robinsons Bank Corp. (RBC) effective next month.

The Bangko Sentral ng Pilipinas (BSP) on Dec. 21 granted BPI the green light to increase its authorized capital stock to P54.6 billion from P50.6 billion previously, the listed Ayala-led lender said in a disclosure to the local bourse on Wednesday.

“The amendment to the Articles of Incorporation to increase its authorized capital is related to the proposed merger between Robinsons Bank Corp. and the Bank of the Philippine Islands, with BPI as the surviving bank,” BPI said. 

The bank has also submitted its capital stock hike proposal to the Securities and Exchange Commission (SEC).

The central bank on Dec. 14, approved the merger between BPI and RBC, which is expected to take effect on Jan. 1, 2024. The transaction is still subject to the approval of the SEC. 

The merger was approved by BPI’s board of directors in September 2022 and by its shareholders in January 2023.

Upon the transaction’s closing, RBC’s shareholders will hold approximately 6% of the resulting outstanding capital stock of BPI.

BPI will also be taking over RBC’s 20% stake in digital lender GoTyme Bank, one of the six entities granted an online banking license by the BSP.

BPI saw its attributable net income grow by 33.33% year on year in the third quarter to P13.47 billion amid higher revenues.

Shares in the Ayala-led bank went down by 60 centavos or 0.58% to close at P103.50 each on Wednesday. — K.B. Ta-asan

PRE-NEED FIRM Loyola Plans Consolidated, Inc. (LPCI) will sell its shares in Loyola Memorial Chapels & Crematorium, Inc. (LMCCI) as part of its liquidation process, the Insurance Commission (IC) said in a notice to the public.

The firm is offering for sale 804,898 shares of stock in LMCCI, the notice posted on the IC’s website showed. This is equivalent to 32.19% of the outstanding shares of stock of LMCCI.

Interested parties may send their bids within 30 days from Jan. 7, 2024.

The IC said the sale will be on an “as-is-where-is” basis and the payment must be made in cash.

“The minimum offer price must not be less than its book value or its current market value as determined by IC or other relevant agency, whichever is higher,” it said.

“The sale shall be net of all applicable taxes, transfer costs, and fees which shall be for the account of the buyers, in order to maximize the value for LPCI’s planholders,” it added.

LMCCI will have the right of first refusal and can match offers made by third parties, the insurance regulator said.

The IC placed Loyola Plans Consolidated under liquidation on Sept. 29 this year, meaning it is insolvent or can no longer resume operations and effectively canceling all issued policies and prohibiting it from writing new business.

The pre-need firm was first placed under conservatorship in March as the IC deemed it was financially incapable of continuing to pay benefits to its policyholders. It was then placed under receivership in May.

Parties may file their claims against the company until April 18, 2024.

Claims filed after the date shall be barred from the normal liquidation proceedings and shall instead be referred to the company for reconsideration in its dissolution and winding up proceedings. — L.M.J.C. Jocson

THE PESO weakened against the dollar on Wednesday due to bargain hunting and even as the greenback dropped versus major global currencies amid expectations of rate cuts from the US Federal Reserve. 

The local currency finished at P55.55 per dollar on Wednesday, weakening by 15 centavos from its P55.40 close on Friday, data from the Bankers Association of the Philippines showed.

The peso opened Wednesday’s trading session weaker at P55.45 versus the dollar, which was already its intraday best. Meanwhile, its worst showing was at P55.888 against the greenback.

Dollars traded rose to $1.531 billion on Wednesday from the $1.083 billion seen on Friday.

Philippine financial markets were closed on Dec. 25-26 due to nonworking days for Christmas.

“The local currency weakened from bargain-hunting after the peso hit new [highs] last Friday,” a trader said in an e-mail.

Friday’s close of P55.40 was a near one-month high for the peso as it was its best finish since P55.30 on Dec. 7.

The peso weakened as holiday spending tapered off, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The Christmas holiday spending rush together with the seasonal surge in OFW (overseas Filipino worker) remittances and conversion to pesos (is) already done and over with, though could still be somewhat offset by some seasonal increase spending ahead of the New Year holidays this coming long weekend,” Mr. Ricafort said.

The peso dropped even as the dollar was weaker against major global currencies on Wednesday amid market expectations of policy easing from the Fed by next year, he noted.

The dollar remained under pressure on Wednesday as expectations that the Federal Reserve would soon cut interest rates took hold in the market, with thin year-end flows keeping movements limited, Reuters reported.

The dollar index, which measures the US currency against six rivals, was at 101.47, just shy of the five-month low of 101.42 it touched last week. The index is on course for a 1.9% drop in 2023 after two straight years of strong gains, driven by first the anticipation of and then the actual hiking of rates by the Fed to battle inflation.

Markets are now pricing in a 79% chance of a rate cut starting in March 2024, according to CME FedWatch tool, with over 150 basis points of cuts priced in for next year.

For Thursday, the peso may rebound on the back of demand for the currency as the year closes, the trader said.

The trader expects the peso to move between P55.4 and P55.65 on Thursday, while Mr. Ricafort sees the local unit ranging from P55.45 to P55.65 versus the dollar. — Keisha B. Ta-asan with Reuters

SINGAPORE — Singapore’s key consumer price gauge slowed to 3.2% in November on the year, in line with expectations, official data showed on Tuesday, and headline inflation fell to 3.6%.

In a joint statement, the Monetary Authority of Singapore and the trade ministry said headline and core inflation were projected to average 3-4% and 2.5-3.5% respectively in 2024.

The core inflation rate — which excludes private road transport and accommodation costs — slowed from 3.3% in October, while headline inflation dropped from 4.7% in October, and was lower in November than economists’ forecast of 3.8%.

The central bank is set to review monetary policy settings next month after it changed the frequency of policy reviews from a semi-annual to a quarterly schedule.

Manufacturing data, also released on Tuesday, showed that manufacturing output increased 1% in November on a year-on-year basis. — Reuters

THE BANGKO SENTRAL ng Pilipinas (BSP) can further improve liquidity management and debt pricing and supply in the country by developing more instruments and collaborating with the Treasury for its open market operations, the International Monetary Fund (IMF) said.

The IMF, in its staff report for the Philippines following its Article IV consultation, said the BSP could further refine its operational framework as it aims to reduce the reserve requirement ratio (RRR).   

In June, the BSP cut the RRR for big banks by 250 basis points (bps) to 9.5%. It also lowered the ratio for digital banks by 200 bps to 6% and by 100 bps for thrift banks, and rural and cooperative banks to 2% and 1%, respectively.

However, the adjustment in reserve requirements coincided with the expiration of a pandemic relief measure and was combined with an introduction of the 56-day securities, which mopped up any excess liquidity from the RRR cuts. 

“In the future, the BSP could manage banking system liquidity more flexibly by expanding the use of market-based operations like reverse repurchase operations (RRPs). This approach is now viable due to large-scale purchases of government bonds during the COVID-19 (coronavirus disease 2019),” the IMF said.

The IMF also noted that the BSP has shifted to a variable rate format in the auction for the overnight RRP facility in September, which introduced a formal overnight RRP rate and renamed the BSP’s key policy rate to the target RRP rate.

“As the BSP is exiting from the extraordinary liquidity support measures introduced during the pandemic and letting maturing treasury securities run-off, its communication of the desired size of its balance sheet in normal times including the use of its portfolio of treasury securities would be helpful,” it said. 

The changes to the RRP facility are part of BSP reforms that started in 2016, which was when the central bank adopted the interest rate corridor (IRC) framework to help bring short-term market rates closer to its policy rate for better monetary policy transmission.

The RRP facility is part of BSP’s monetary operations to help manage the amount of money circulating in the economy by selling government securities, which the central bank commits to buy back at a later date.   

The BSP and the Bureau of the Treasury (BTr) could also collaborate more to improve the securities market and to further develop a credible yield curve, the IMF said in its report.

“The main issue facing the short-end of the curve is a large discrepancy between yields on BSP bills and Treasury bills. This discrepancy has created challenges for the banking sector in pricing debt instruments accurately, with the Bloomberg valuation tool relying exclusively on government bond yields and banks starting to use the RRP rate explicitly for pricing working capital loans,” it said.

A smooth yield curve would help support the development of a derivatives market for hedging purposes, the IMF said.

“To harmonize the two markets, the BTr should refrain from keeping supply at the short end artificially low by transitioning to a price-taker model during bond auctions. Reducing the number of individual bond series on offer and consolidating maturities into a reduced number of benchmark bonds would help concentrate trading activity,” it said.

The BSP and the BTr could also work on streamlining approved participants in each market because the exclusion of nonbanks from the BSP bill market is a large contributing factor for the observed yield discrepancy, it added.

“Other issues in the two markets, such as the obligations and performance of primary dealers including market-making and facilitating the use of repos of government securities, should also be addressed,” the IMF said.

Meanwhile, the BSP intends to utilize its government securities holdings to support its monetary operations and enhance the transmission of monetary policy.

The central bank is also working on expanding the list of market players with access to BSP bills and has requested follow-up technical assistance from the IMF on developing a benchmark yield curve.

“The BTr has the view that the yield differential is partly due to excess structural liquidity which will decline over time,” the IMF added. — K.B. Ta-asan

YIELDS on government securities (GS) continued to decline last week due to a lack of catalysts as the end of the year nears.

GS yields at the secondary market fell by an average of 6.21 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Dec. 22 published on the Philippine Dealing System’s website.

Most tenors saw their yields decline last week, with rates of the 91- and 364-day Treasury bills (T-bill) dropping by 21.69 bps and 15.14 bps to 5.1579% and 5.8218%, respectively. On the other hand, the 182-day T-bill went up by 13.42 bps to yield 5.5233%.

Rates of tenors at the belly likewise dropped. Yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) went down by 5.04 bps (5.9323%), 6.96 bps (5.9203%), 7.95 bps (5.9193%), 7.79 bps (5.9291%), and 5.69 bps (5.9592%), respectively.

Yields at the long end were mixed. The 10- and 20-year papers saw their rates decline by 10.51 bps and 1.06 bps to 5.9665% and 6.1201%, respectively, while the 25-year paper inched up by 0.09 bp to yield 6.1281%.

Total GS volume traded reached P22.51 billion on Friday, more than three times the P7.46 billion recorded on Dec. 15.

The continued drop in GS yields last week was due to a lack of catalysts and bond supply, a bond trader said in a Viber message.

“Bond yields dropped as investors scramble to find investment outlets. The move was also supported by a drop in global yields,” the bond trader said.

The lack of catalysts was likely due to risk aversion and the “higher for longer” policy stance of local monetary authorities, Oikonomia Advisory & Research, Inc. President and Chief Economist John Paolo R. Rivera said in a separate Viber message.

However, increased consumption and various economic activities brought by the holiday season can help drive trading in the last week of the year, he said.

“Trading is usually active in the latter parts of the year in anticipation of slower flow of funds as the new year starts. Increased consumption due to holidays is also indicative of an active economy,” Mr. Rivera added.

“Total borrowing remains to be constrained as interest rates will remain elevated given the hawkish stance of BSP (Bangko Sentral ng Pilipinas),” he added.

The BSP is unlikely to start policy easing in the next few months and will only consider cutting rates if inflation settles at the midpoint of the 2-4% target, its chief said last week. 

“We’re unlikely to cut rates in the next few months. We’re in a higher for longer (scenario). When I say hawkish, that basically means high for a while,” BSP Governor Eli M. Remolona, Jr. told reporters.

The Monetary Board this month kept its benchmark rate at a 16-year high of 6.5% for a second straight meeting. Interest rates on the overnight deposit and lending facilities were also left unchanged at 6% and 7%, respectively.

From May 2022 to October this year, the BSP raised borrowing costs by a cumulative 450 bps to tame inflation.

The BTr plans to borrow a total of P435 billion during the first quarter, with the bulk coming from T-bond auctions, based on its borrowing plan released last week.

For the week, Mr. Rivera said trading may pick up as traders may take advantage of the momentum seen in the past weeks.

“As expectations level off and as traders harness the holiday effects, trading may increase albeit at a slower rate. The last [three] days are crucial as it can make or break annual targets,” he said.

“Bond trading will remain to be constrained given a foreseeable elevated policy rates. Higher cost of borrowing inhibits bond issuance,” Mr. Rivera added.

GS yields may move sideways with an upward bias, with investors expected to cash in on their gains, the bond trader said.

“For next year, it will be bumpy as the market’s pricing in of rate cuts and the corresponding reaction in bonds assume that yield curve inversion will remain. This may not be consistent with expectations on inflation,” the trader added. — Bernadette Therese M. Gadon

The local unit closed at P55.40 per dollar on Friday, gaining 17 centavos from its P55.57 close on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso appreciated by 25.5 centavos from its P55.655 close on Dec. 15.

The peso opened Friday’s session at P55.35 against the dollar. Its intraday best was at P55.33, while its weakest showing was at P55.435 versus the greenback.

Dollars exchanged rose to $1.083 billion on Friday from $841.25 million on Thursday.

Philippine financial markets were closed on Dec. 25-26 due to non-working days for Christmas.

The peso strengthened on Friday amid the seasonal surge in remittances from overseas Filipino workers (OFWs) to help finance holiday-related spending, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso also appreciated as the dollar weakened on Friday after the slower-than-expected US economic growth print in the third quarter, he added.

US gross domestic product (GDP) grew by 4.9% in the third quarter, revised down from the previously reported 5.2%, Reuters reported. However, this was above the 2.1% print in the second quarter and still marked the fastest pace of expansion since the fourth quarter of 2021.

The US economy has been expanding at a pace higher than what officials from the US Federal Reserve regard as the non-inflationary growth rate of around 1.8%. 

The slower US GDP print in the third quarter could support Fed rate cuts in 2024, as priced in by markets, Mr. Ricafort said.

The Fed held its target interest rate steady at the 5.25-5.5% range during its December meeting. Since March 2022, the US central bank hiked its target policy rate by 525 basis points (bps).

For this week, the peso may continue to strengthen as remittances continue to rise amid the holiday season, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

For the first 10 months of 2023, cash remittances increased by 2.8% year on year to $27.49 billion, central bank data showed.

The Bangko Sentral ng Pilipinas expects remittances to grow by 3% this year.

For this week, Mr. Ricafort expects the peso to move between P55.20 and P55.60 per dollar, while Mr. Roces sees the peso ranging from P55.30 to P55.50. — Keisha B. Ta-asan with Reuters

LENDERS expect a recently introduced compliance rating system to boost banks’ lending and asset quality, and result in greater financial inclusion.

Last month, state-led Credit Information Corp. (CIC) issued a circular that will implement a Compliance Rating System to monitor the compliance of Submitting Entities in Production (SEPs).

Union Bank of the Philippines, Inc. (UnionBank) said in an e-mailed statement that the rating system boosts financial inclusion by “providing lenders with accurate credit information which is key in the credit decisioning process.” 

“The new guidelines ensure strict compliance of all submitting entities with the credit reporting requirements,”  the bank said, referring to the CIC circular titled “Implementing Guidelines for the Compliance of all Submitting Entities under the Credit Information System Act.”

CIC acts as a central credit registry of Filipinos’ credit information. Its new system will charge a Compliance Assistance Fee for SEPs that will cover the cost of providing technical support and enforcement. 

“With the banks’ increased knowledge of the customers’ credit history, it is assumed that credit assessment would be more thorough. This would lead to better asset quality and improved NPL (nonperforming loans),” China Banking Corp. (China Bank) Consumer Banking Segment Head Aloysius C. Alday, Jr. said in an e-mail.

UnionBank said lenders will be able to have better risk-adjusted returns and price loans better.

The banking industry’s gross NPL ratio went up to 3.44% in October from 3.4% in September and 3.41% in the same month last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

The latest figure is also the highest bad loan ratio since 3.46% in May.

Meanwhile, bad loans rose by 9.2% year on year to P449.435 billion from P411.632 billion. Month on month, it inched up by 1.2% from P444.313 billion in September.

Mr. Alday said that while some banks might struggle with setting up data sharing, they are likely to benefit in the long term as overall lending will grow due to better know-your-customer (KYC) data.

Nonetheless, all banks will need to comply with CIC’s compliance rating system to cope with the increasing risks, especially for smaller lenders, UnionBank said.

“It is important to address the risks. Otherwise, smaller entities should evaluate their options, particularly limiting their offerings to simpler products or services to avoid the additional cost of compliance,” the Aboitiz-led bank said.

Outstanding loans by big banks rose by 7.1% to $11.3 trillion in October from $10.55 trillion a year earlier, BSP data showed.

This was faster than the 6.5% expansion in September, marking the fastest pace in bank lending growth in two months or since the 7.2% seen in August.

On a month-on-month seasonally adjusted basis, outstanding universal and commercial bank loans inched up by 1.4%.

“This compliance will result in each bank’s portfolio growth with facilitated credit assessment and better asset quality with the deeper knowledge of each loan customer,” Mr. Alday said.

“However, this will be limited to existing ‘banked’ customers who have existing records,” he noted.

To address this, CIC may use existing data shared by the banks to develop credit scoring for the unbanked. — Aaron Michael C. Sy

ASIA UNITED Bank Corp. (AUB) has expanded the use of its e-wallet HelloMoney to South Korea, Malaysia, and Hong Kong, making the platform available in four countries or regions including Japan.

“We will continue to bring HelloMoney closer to more users to make mobile banking easier and for more merchants to help their business grow and thrive in the post-pandemic world,” said Wilfredo E. Rodriguez, Jr., AUB executive vice-president and head of operations and information technology, in a statement on Thursday.

“With Alipay+’s global presence through its integration with local merchants worldwide, our HelloMoney users will have a wider reach in payment acceptance while ensuring a safe and secure digital transaction,” he added.

The expansion into South Korea, Malaysia, and Hong Kong is powered by AUB’s partnership with Alipay+, along with several cross-border payments, and marketing and digitalization solutions operated by Ant International.

HoneyMonehy users may conduct transactions by scanning a Quick-Response (QR) code displayed in merchant stores abroad.

For South Korea, HelloMoney users can scan the ZeroPay QR, available in more than 1.7 million merchants nationwide.

In Malaysia, HelloMoney users can scan DuitNow QR, operated by PayNet, which is available in 1.8 million merchants.

Mr. Rodriguez said over the years, AUB has been building “a digital arsenal,” which he said includes “pioneering initiatives and innovations — from end-to-end digital account opening, to enabling clients to make banking easy through their mobile phone and merchants to sustain their businesses even with restricted mobility during the pandemic.”

HelloMoney was launched by AUB in 2019, as the bank looked to enable users to open an account without going to a physical branch and perform bank-to-bank fund transfers. 

Through the e-wallet, users may also buy prepaid load, remit money through PeraPadala, pay via QR code, settle bills, withdraw cash through ATM, and shop online using HelloMoney’s own virtual Mastercard.

“Members of state-owned Pag-IBIG Fund can also manage their account and perform banking transactions through the Pag-IBIG Loyalty Card Plus via HelloMoney,” AUB said.

As of end-October, HelloMoney transactions grew by 65% to 30 million from 19 million in the same period last year. This was equivalent to P115 billion, 82% higher than year-ago’s P63 billion.

AUB’s net income rose by 15.04% year on year to P1.95 billion in the third quarter amid continued core business expansion and lower provisions. — Aaron Michael C. Sy