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Banking&Finance
Declaring dividends still iffy for EastWest
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otianun-led East West Banking Corp. (EastWest) may hold off declaring dividends until next year due to expansion plans, its top chief said. “We don’t expect to declare dividends this year or maybe next year too. [It] also depends on our future expansion plans,” EastWest CEO Antonio C. Moncupa, Jr. said in a recent stockholders’ meeting. While Moncupa did not explain further the initiative, he said that the expansion could benefit the shareholders in the future as well. EastWest “is in a state of expansion, which means that it’s with consumer capital... [E]xpansion is a very positive project for our shareholders,” he explained. Apart from this, the EastWest chief said that the bank has become more conservative in terms of capital management with the coronavirus pandemic. Moncupa clarified, however, that there was still a chance to declare dividends this year given that the bank was earning well. According to its 2019 annual financial report, the listed bank has total unappropriated retained earnings available for dividend declaration amounting to P20.97 million. The last time EastWest declared dividends was in 2018, according to its disclosure to the local bourse, issuing them in the form of 750 million stocks. In the same meeting, Moncupa revealed that the bank was seeing around P10 billion in provisions
for bad debts this year as it gears up from the financial impact of the government measures addressing the pandemic. This estimate is close to 4 percent of its projected total loan portfolio this year. As of April, EastWest has booked provisions for nonperforming loans amounting to P4.5 billion, which is nearly half the anticipated 2020 full-year figure. Comparing this to the first quarter, provisions grew by almost twofold from P2.4 billion. With this estimate, Moncupa said that EastWest’s income for 2020 would take a hit. EastWest is projecting its net income to only reach around P5 billion to P6 billion this year, which is lower than its earlier target of P12 billion prior the pandemic. The bank’s latest estimates are lower than its last year’s net income amounting to P6.24 billion. “The bad news is we will not have the banner year we’d hoped we will this year,” he added, noting there were still many uncertainties. Still, he said that the bank’s “balance sheet is resilient, and it could churn good profits.” Moncupa reported that the bank’s net income amounted to P2.7 billion as of end-April. As of quarter ending-March, EastWest’s total assets inched up 3 percent to P384.1 billion while loans jumped by 6 percent to P261.4 billion. Deposits, meanwhile, hiked by 3 percent to P294.3 billion for the period. Tyrone Jasper C. Piad
Perspectives
Automating the security function
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e’re seeing a convergence of data in the interest of automating security from identity authentication through threat detection and response. A broad set of know-yourcustomer (KYC) data is being gathered and analyzed by many sectors, including financial services, eCommerce/retail, technology, media and telecommunications, and automotive, among others. This information typically has been heavily siloed. But companies are beginning to realize they are sitting on a treasure trove of data that—if better organized and made more efficiently accessible—can be extracted and analyzed for a variety of value-added purposes.
The landscape as we see it
Companies are working hard to automate functions that until very recently have been purely manual, by pulling together historically disparate data sets. Not only are businesses better able to confirm that digital customers are who they say they are, they are also acquiring deeper information, such as who has a virus on their computer, who recently received a phishing email and who tried to enter a network to which they don’t have access. Security professionals are combining third-party tools and in-house solutions to automate as much of the overall cyber playbook as possible, and align it with the organization’s business development and customer experience objectives. Companies are looking to automate the first and second lines of defense via the cloud to better respond to threats across the enterprise without a human having to do that work, while simultaneously
confirming that the security controls they expect to have in place are indeed operating as expected.
What we believe you should do about it
Always remember: Whoever controls the data has the power. With that firmly in mind, the first step is to transfer your critical enterprise data from the different third-party vendors that so many companies maintain across their systems into a centralized, accessible location. We also suggest advocating for a data normalization initiative within the organization to scrub and properly label the data so you understand what data you have, how it’s being posted, and what features are available within the datasets. Organizations in the early stages of maturity in terms of data normalization may not be equipped to jump right into insight extraction through AI and machine learning. For these companies, it’s important to prioritize the use cases they want to address—fraud detection, customer experience enhancements, operational efficiency improvements, for example—and determine how to plug in the right tools, technologies, and advanced analytics to leverage the data once it’s available. The excerpt was taken from KPMG article, “All hands on deck: Key cyber security considerations for 2020.” © 2020 R.G. Manabat & Co., a Philippine partnership and a member-firm of the KPMG network of independent member-firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in the Philippines. For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.
BusinessMirror
Monday, June 15, 2020 B3
S&P: Balance-sheet strength may help banks weather financial shocks
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By Tyrone Jasper C. Piad
@Tyronepiad
&P Global Ratings is counting on the banking industry’s balancesheet strength and support measure to cushion the financial shocks as government imposed lockdowns addressing the coronavirus disease 2019 (Covid-19) pandemic. In a recent statement, the global debt watcher said that it has downgraded ratings for many banks in the past month as businesses were ordered closed to stem the Covid-19 contagion. “We continue to expect that bank rating downgrades this year due to the Covid-19 pandemic will be limited by banks’ strengthened
balance sheets over the past 10 years, the support from public authorities to household and corporate markets, and our base case of a sustained economic recovery next year,” the credit-rating agency firm said. Analysts have been saying that the Philippine banking system’s capitalization can withstand the
pandemic. As of end-April, the banking sector’s capital account reached P2.35 trillion, which was nearly 9-percent higher compared to P2.16 trillion for the same period last year. The Bangko Sentral ng Pilipinas, meanwhile, has been providing relief by cutting policy rates and reserve requirements. S&P Global Ratings Credit Analyst Alexandre Birry said that the firm has taken 212 rating actions on banks related to pandemic and oil shock recently, and 76 percent of these were outlook revisions. The analyst added that around 30 percent of banks were now tagged with a negative outlook. “We expect that second-quarter results will shed more light on the relative impact of the pandemic on banks across the globe, but the full effect on asset quality will likely only become clear much later in the year,” Birry explained.
2nd round of cash grants completed–LandBank
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tate-run Land Bank of the Philippines (LandBank) has completed the payout for the second round of cash grants worth over P6.74 billion to 1.3 million Pantawid Pamilyang Pilipino program beneficiaries of the government’s social amelioration program. With the completion of the payout for the second wave of cash assistance to LandBank cash cards of intended beneficiaries on June 11, the bank said they may now withdraw the cash grant from more than 2,000 LandBank automated teller machines (ATMs) available nationwide free of charge and from more than 20,000 ATMs of BancNet-member banks. They may also use their cash cards for cashless purchases in groceries, supermarkets and drugstores through the point-of-sale machines at the cashier or check-out counters.
“Through the LandBank cash cards, we already delivered the second wave of cash grants to 1.3 million beneficiaries in an immediate, safe and secure manner. Rest assured that LandBank will continuously work with the national government to ensure that future beneficiaries will receive their emergency subsidies quickly, while strictly adhering to the quarantine measures in place,” LandBank President and CEO Cecilia C. Borromeo said in a statement. LandBank’s distribution of cash grants is in line with the passage of Republic Act 11469 and the issuance of DSWD-DOLE-DTI-DA-DOF-DBM Joint Memorandum Circular 1, series of 2020 or the “Special Guidelines on the Provision of Social Amelioration Measures” in a bid to ease the impact of lockdowns. Bernadette D. Nicolas
Bond investors face enigma over Europe’s safest asset
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he rally in German bonds in the past week has reminded fund managers why betting against Europe’s safest assets is a risky business. The debt slid last month as economies showed signs of recovering from the ravages of the coronavirus epidemic, leading some analysts to predict yields would soon turn positive after a year below zero. Instead, worries over a second wave led investors to dump stocks and turn to havens such as bunds. Now, funds are in a quandary. An economic recovery, increased German borrowing and regional stimulus are all factors that suggest higher bund yields down the road. But those shorting bunds in the past have been badly burned, and for some, German debt just isn’t worth touching. “We have no position in bunds,” said Patrick Armstrong, chief investment officer at Plurimi Wealth LLP. “Don’t see the attraction of owning negative 0.3 percent, but not a good level to short.” While the negative yields mean investors lose cash if holding the debt to maturity, traders can make money if it keeps rallying. That has led German bonds to return more than 7 percent since the start of 2018, through the turmoil in Italian politics and Brexit, trade wars and the pandemic, according to Bloomberg Barclays indices. They serve as a proxy for European risk, and tend to rise on concerns about the stability of the euro area. So the huge European Central Bank asset purchases and a plan to jointly issue euro debt provides stability and a new challenger, something money managers haven’t had to deal with before. “Investors could substitute for bunds with the new European Commission issuance,” said Ross Hutchison, an investment director in Aberdeen Standard Investments’ fixed-income
team. “We think central bank support will keep yields low, but we don’t think bunds are an attractive place to hold these overweights right now.” Still, with the risk of a second virus wave and central banks vowing to do whatever it takes, investors are grabbing longer maturity returns wherever they can. Demand for European sovereign debt sales via banks last week topped $300 billion. Germany initially pulled in more than $50 billion of bids for its sale of 30-year bonds, the only tenor offering positive yields, allowing it to cut pricing on the deal. “What makes bunds unique amongst other defensive assets is that they offer investors downside protection specifically against a breakup of the euro area,” said Wolfgang Bauer, a fund manager at M&G Plc. While demand for such a break-up hedge has been reduced, he “wouldn’t write bunds off just yet.”
Lurking risks
The bloc’s groundbreaking issuance plan isn’t confirmed yet. There are signs northern European nations could revolt, with Austria the latest nation to declare its opposition, not wanting to be on the hook for rebuilding badly-hit southern countries. All sorts of supportive global risks are lurking. The chances of a no-deal Brexit this year, the resumption of US-China tension and the US election, to name a few. That could be good for Mark Dowding, chief investment officer at BlueBay Asset Management, who is adding exposure to bunds because he expects the ECB to hold yields down. But even he’s not feeling particularly enthusiastic. “To be honest we have no strong conviction,” he said. “Ultimately we think yields aren’t really going anywhere.” Bloomberg News
Last month, S&P affirmed its “BBB+” long term and “A-2” shortterm sovereign credit rating for the country as it projects the economy to have an above-average growth over the medium term. “The ratings are also supported by the economy’s sound external settings. These are weighed against the Philippines’ lower-middle-income economy,” the debt watcher explained. Its long-term outlook remains stable on the back of normal policymaking seen to support credit metrics and anticipated economic recovery next year. While S&P forecast that Philippine economy is likely to decline by 0.2 percent this year, it noted that gross domestic products might rise by 9 percent next year if the virus will be contained by the first half of 2021 across the world. The growth will be driven by investment and exports, it added.
Survey: Majority of Pinoys open to enrolling bank accounts online
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ajority of Filipinos are open to enroll a financial account via digital platforms, a survey revealed, noting that more local consumers are embracing mobile banking. In the Consumer Digital Banking Survey conducted by global analytics software firm FICO, it was shown that 76 percent of Filipinos said they would open a financial account online. Forty percent of respondents were opening online financial accounts for everyday transactions, 38 percent for credit cards and 33 percent for personal loans. “As consumers’ reliance on online services grows in response to Covid-19 (coronavirus disease 2019), we expect further shifts in adoption and indeed an acceleration and acceptance in opening bank accounts digitally,” said Subhashish Bose, FICO’s lead for fraud, security and compliance in Asia Pacific. Bose added that Filipino consumers have become digital natives, explaining that 26 percent of them prefer to open a bank account via smartphones. This percentage is higher compared to 18 percent in the United States and 25 percent in the United Kingdom. The FICO official said that around 40 percent of the Filipinos own a smartphone and spend 4.58 hours a day on their phones on average according to a recent study. Looking at the demographics, FICO said that older consumers were more likely at the forefront in promoting use of digital banking platforms. Nearly half or 46 percent of those over 55-year old said they would enroll a bank account online. Around 40 to 45 percent of 25-34, 35-44 and 45-54 age brackets shared the same sentiment. Only 28 percent of the 18-24-year-old group claimed they would do the same. “Younger Filipinos are adept at using smartphones and computers, however, many do not have the required identification forms to open bank accounts at a young age, don’t have regular income or are presented with bank account options that are not appealing,” Bose explained. The survey also revealed that a substantial portion of Filipino respondents were expecting to accomplish all processes of opening accounts digitally. FICO noted: “67 percent of Filipinos thought they should be able to prove their identity by scanning documents or providing a “selfie,” 47 percent expected to prove where they live without going offline and 45 percent said they should be able to set up a biometric such as a fingerprint scan at account opening.” Only 41 percent said that they would accomplish necessary offline application processes as soon as possible if the other requirements could not be completed online. Overall, FICO said that banks and financial institutions that don’t employ complete digital account opening processes could lose over 40 percent of their new clients. “Banking executives should review the application completion for authenticated versus non-authenticated applications, as well as how many applicants with saved or abandoned applications return to complete the process,” Bose added. FICO conducted the survey with 5,000 respondents across Brazil, Canada, Germany, Malaysia, Mexico, Philippines, Sweden, UK and the USA. Tyrone Jasper C. Piad
