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By Maricel E. Burgonio, Reporter
THE Bangko Sentral ng Pilipinas (BSP) expects
medium-sized banks to merge to improve their asset quality. BSP Gov.
Amando M. Tetangco Jr. said mergers and acquisitions are largely
market-driven and the number of market players would really be
determined by how banks see economies of scale fitting into their
business models within the regulatory framework.
“We may see a few more, although probably not
as large as we have seen recently,” Tetangco told reporters.
The governor said more banks are expected to
consolidate over the medium term as inadequately capitalized
medium-sized banks seek higher profits and better efficiencies under
Basel 2, an international framework imposing stricter capital
requirements.
The BSP’s forecast came on the heels of last
week’s announced merger between Philippine National Bank (PNB) and
Allied Banking Corp. The combination will raise the merged
entity’s asset base to P388 billion, making it the country’s
fourth largest bank. Its capital would remain adequate at 19 percent
vis-à-vis the regulatory minimum of 10 percent.
Tetangco earlier said large banks would merge to
form 5 big players during his term at the BSP.
Besides PNB and Allied Bank, other lenders that
had merged or acquired rivals were Bank of the Philippine Islands
(BPI), which bought Prudential Bank; Banco De Oro and Equitable-PCI
Bank; and China Banking Corp.’s acquisition of Manila Banking
Corp.
“For our part, what we have done is create the
regulatory and policy environment that would encourage banks to
improve their capital base, while allowing them to take on risks as
long as they are able to show that they could adequately manage
these, given their level of skill and capital,” Tetangco said.
The BSP earlier reported that banks’ combined
profits grew 9.5 percent to P62.9 billion last year from P57.4
billion in 2006. This was supported by double-digit expansion in
interest income and fee-based services.
For this year, net income growth however would
weaken due to a slowdown in economic activity, leading to weaker
than expected loan expansion, Deutsche Bank said earlier.
Also, increased competition could put further
pressure on margins and profitability, the German lender said.
Banks’ adoption of Basel 2 could slow down
their lending activities as most of their clients are small and
medium enterprises. Adapting Basel 2 requires a change in the way
banks do business, including their internal risk and data management
systems.
Tetangco had said the ongoing global financial
market turmoil highlights the importance of stringent credit
underwriting standards and increased transparency and disclosure
requirements in complex financial transactions.
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