By Bjorn Biel M. Beltran

In a bid to attract further investments into the Philippines, the Duterte administration has invested in an aggressive infrastructure program that will lay the groundwork for the country’s strong sustained economic growth. The thought behind it is that for a skyscraper to rise, the foundations need to be laid on firm bedrock to bear the weight. The same concept holds true for almost any ambitious undertaking. The Philippine Business Bank (PBB) is drafting plans to lay some groundwork of its own.

In a briefing with the media, John David D. Sison, PBB’s Corporate Planning Group and Investor Relations head, said that PBB has seen a “phenomenal growth” in its balance sheet for the past year.

From last year’s figures, PBB’s loan portfolio significantly increased, while the Bank’s deposits expanded. As a result, all of PBB’s core brick-and-mortar income sources such as net interest income, service fees, and miscellaneous income expanded versus the same period last year, where core income has immensely grown.

The savings bank reported a net interest income of P2.2 billion for the third quarter of 2017, up 19.0% versus P1.8 billion in the comparable period the year before on the back of newly streamlined account management processes.

Loans and other receivables for the period grew 37.4% year on year, ending the quarter at P65.1 billion. Consequently, interest income from loans and other receivables increased by 29.8% from P1.958 billion in the nine months ended 2016 to P2.541 billion in 2017.

Nine-month core income also expanded by 50.6% to P673.7 million versus the P447.3 million from the same period in 2016.

And PBB is still growing. This year, Mr. Sison said that it could expect anywhere from P14 billion to P20 billion in new loans for 2018.

“This year, we might be doing around 2 billion a month in terms of loans,” he said. “That’s the optimistic target. But I think we will be quite satisfied if we do around 14-15 billion in new loans this year.”

Even for a conservative estimate, such an upshot can quickly spiral out of hand. To keep up with the rapid pace of its own growth, the bank is planning to raise more funding this year, an additional P3 billion to P5 billion, through the potential sale of LTNCDs (Long Term Negotiable Certificate of Deposit) and bonds in tandem with its usual capital raising efforts.

“Definitely we will need to raise equity capital in 2018,” Mr. Sison said. “I guess that’s an indicator of how much confidence we have in our ability to deploy the capital. I’m not a big macroeconomics guy, but with respect to what we’re seeing in the market, even with the expectation that rates will move up this year because of inflation concerns, there’s still a lot of demand for financing.”

“For PBB to be able to participate in that anticipated demand, we will need to raise additional capital, additional funding, not just to support us on the financial side but also on some much-needed infrastructure improvements,” he added.

Mr. Sison noted that part of the expected new equity will finance the purchase of an updated core banking system with the aim of expediting management decision making processes and bring PBB to the digital age. As innovation in the financial industry steers it further towards a future where a significant portion is faceless, fully electronic banking, PBB is spending P600-750 million in the next 18-24 months to strengthen its infrastructure to keep up.

“We’re starting from scratch essentially to better prepare us for that future where everything or a significant number of transactions are digital in nature,” Mr. Sison said.

“That core banking system will enable us to be one of the leaders in that field. Right now, we’re already hearing universal banks that are planning to roll up a product within the next 6-12 months that offers digital services from loan applications to disbursement. I guess it’s something positive for the industry. Hopefully, it happens sooner rather than later, and PBB is in a position to participate in that movement.”

To this end, Rolando R. Avante, PBB president and CEO, noted that the bank is carefully considering easily adaptable changes to keep the processes simplified and straightforward. PBB at its heart continues to be a customer-centric business, and despite sweeping changes and rapid growth that core component will not change.

“Definitely, the bank’s growth and expansion plans will continue and with that, also our emphasis on service excellence and delivery,” Mr. Avante said.

“We will also continue to enhance our technology infrastructure across the bank, including our online banking through the cash management capabilities to ensure the quality of our clients’ experience is consistent across all channels and to meet the evolving demands of our customers’ businesses. Strengthening our risk management and compliance practices will continue to be a priority as we strive to maintain our strong asset quality, particularly in this uncertain environment. Our performance is guided by our time-tested principles of prudence and enterprise, and we continue to focus on the core fundamentals of banking — ensuring balance sheet strength and building capabilities for the future.”

“You might not be the best bank in terms of the rates, the expanse of your branch network, but if you’re a bank that is able to deliver service at a high level, then that can be a differentiator,” he added.

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