MANILA -- Top management of Union Bank of the Philippines (UnionBank) is expecting that the cut in banks’ reserve requirement ratio (RRR) will further lift loan growth to around 18 percent this 2019.
In an interview after the listing of the bank’s PHP5.8-billion three-year fixed rate notes Monday, UnionBank President and Chief Executive Officer (CEO) Edwin Bautista said they have set an initial target of 16 percent expansion for combined loans of UnionBank and its thrift banking arm, City Savings Bank (City Savings), for the year.
To date, UnionBank’s total loans has risen by around 16 percent, he said.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) show that bank lending, excluding banks’ placements with the reverse repurchase (RRP) facility, posted a slower growth of 12.7 percent last April from month-ago’s 12.9 percent.
Last May 17, Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) slashed by 200 basis points the RRR of universal and commercial banks (U/KBs’) to 16 percent. The cut will be implemented in phased level at 100 basis points by May 31, 2019, and 50 basis points each on June 28 and July 26.
The same rate of reduction was also made for thrift banks’ (TBs) and non-bank financial institutions with quasi-banking functions (NBQBs) while a 100 basis points cut for demand deposits and Negotiable Orders of Withdrawal (NOW) of rural banks (RBs) and cooperative banks (Coop banks) took effect last May 31.
Authorities have said that a 100 basis points cut in U/KBs’ RRR is expected to release about PHP90 billion to the system while it is projected to be about PHP9.3 billion for TBs, and PHP1.8 billion for RBs and Coop banks.
Bautista explained that with the RRR cuts, banks will have more funds available for loans.
He said bulk of their loans, at about 40 percent, are housing loans extended to Overseas Filipino Workers (OFWs) or those with jobs that are “somehow related to overseas.”
Aside from the additional funds because of the result of RRR, the UnionBank chief said gains from their recent bond sale, which was upsized from PHP3 billion initial offering, will also boost their funds.
The bond that was listed Monday is the second tranche after the initial PHP16.8 billion issuance last December.
Bautista said it is possible to issue the third tranche within the year but stressed that this will depend on how fast the bank will exhaust the latest issuance.
He, however, said that the main purpose of the latest issuance “is to lengthen the maturity profile of the liabilities so that we can reduce the gap between the tenor of the loans and the deposits.”
“So it does two things - it gives us more money to lend and at the same time the tenor is also lengthened,” he added. (PNA)
