Grab expands taxi services to Subic

November 28, 2018 | 12:02 am

GRAB Philippines (MyTaxi.PH, Inc.) said on Tuesday it has started offering its GrabTaxi services at the Subic Bay Freeport Zone, the 12^th city in the Philippines where it operates.
In a statement, the ride-hailing firm said 120 taxi drivers in Subic are already registered with Grab.
“With GrabTaxi now in place, locals and tourists will now have a more convenient, safer, and faster way of commuting,” Grab Philippines country head Brian P. Cu said in the statement.
Aside from Subic, Grab is also present in Manila, Cebu, Davao, Pampanga, Cagayan de Oro, Bacolod, Baguio, Bataan, Naga, Iloilo and Tacloban.
Subic Bay Metropolitan Authority (SBMA) chairman and administrator Wilma T. Eisma said having Grab’s services in the city will help improve connectivity for the thousands of employees in the area.
“GrabTaxi can make a difference in the lives of locals and tourists in Subic,” she was quoted as saying. — Denise A. Valdez

Financial markets outlook mixed for the rest of 2018

November 28, 2018 | 12:02 am

By Christine Joyce S. Castañeda, Senior Researcher
THE weaker-than-expected economic growth, coupled with persisting domestic inflation concerns and geopolitical tensions continue to send local financial markets on a spin in the July-September period, with local and foreign headwinds providing a mixed outlook on financial markets moving forward.
In the third quarter, the peso averaged P53.54:$1, depreciating 2.1% from the previous quarter’s average of P52.43:$1, Bangko Sentral ng Pilipinas (BSP) data showed. Year on year, the peso depreciated against the greenback by 5.1% from the P50.84:$1 average in the same period last year.
The period also saw the peso breaching to as low as P54.33 per dollar last Sept.26 — the weakest in nearly 13 years since it closed at P54.43 on Nov. 22, 2005.
Meanwhile, in the secondary bond market, yields on the 91-day Treasury bills and 10-year bonds were up by 40.23 basis points (bps) and 81.31 bps, respectively, during the quarter, according to data from the Philippine Dealing & Exchange Corp.
For equities, the Philippine Stock Exchange index (PSEi) closed the July-September period at 7,276.82, up by a mere 1.2%, which is a reversal from the previous quarter’s 9.9% loss. Year to date, the PSEi was down by 16.6%.
The BSP cited external and local factors that affected the financial markets in the third quarter.
“On the external front, uncertainty over the pace, timing and magnitude of the US Fed’s path to normalization have affected emerging markets including the Philippines,” BSP said in an e-mail to BusinessWorld.
According to the central bank, these factors resulted in capital flows, currency depreciations and inflationary pressures.
The BSP also added that the “increasing threats of inward-looking or protectionist policies (specifically, US policies towards China) as well as geopolitical risks” affected emerging markets, including the Philippines, last quarter.
“On the domestic front, rising inflationary pressures amid a booming economy, increase in excise tax and global oil price hikes were likewise seen as significant contributors to market sentiment during the quarter,” the BSP said, adding that adverse weather conditions affected inflation expectations and market sentiments last quarter.
For his part, Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK), classified the factors that affected the performance of local financial markets last quarter into three main areas: domestic growth, geopolitics, and monetary policy.
Mr. Dumalagan noted that at the start of the third quarter, market players were positive that the economy will accelerate this year, brought by the administration’s “Build, Build, Build” program. However, concerns over domestic inflation “intensified,” resulting in weaker-than-expected economic growth and downward revisions in growth prospects.
“Likewise, geopolitics also influenced market movements in the third quarter. Majority of these conflicts were US-related, such as the conflict between Turkey and the US about the release of a detained Evangelical Christian pastor,” the economist said, referring to the spat between Washington and Ankara over an American pastor accused of participating in a failed coup two years ago, the Syrian civil war, and other diplomatic issues.
The economist also cited the US-China trade talks which caused “massive global volatility” and caused fears of a global growth slowdown. Monetary policy was also attributed as a “top market-mover.”
During the quarter, the BSP raised policy rates by 100 bps — with an increase of 50-bps apiece in its August and September meetings. The central bank again raised rates for the fifth consecutive time this year last Nov. 15 by a softer 25 bps. For the year, rates increased by 175 bps.
Aside from the BSP, the US Federal Reserve also raised its policy rates by 25 bps in its September meeting, leaving intact plans to gradually tighten policy there.
For Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines (UnionBank), the factors that weighed in on local financial markets in the third quarter were “rising domestic inflation and inflation expectations, peso depreciation, the BSP rate hike, ‘faster-than-expected’ monetary normalization in advanced economies, and geopolitical tensions abroad.”
Meanwhile, Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), added the wider local budget deficit as one of the major catalysts last quarter.
Data from the Philippine Statistics Authority (PSA) showed that the economy grew to its slowest pace in three years last quarter due to tempered household spending. Gross domestic product (GDP) grew by 6.1% year on year, slower than the previous quarter’s revised 6.2% and the 7.2% recorded in the same period in 2017.
GDP growth averaged 6.3% in the first three quarters, slower compared to the 6.8% posted in the same period in 2017, and is below the government’s downward-adjusted 6.5-6.9% target range for 2018.
Meanwhile, inflation for the July-September period averaged 6.3%, faster than the previous quarter’s 4.8% and the 2.7% in 2017’s comparable period.
On the other hand, the government’s fiscal deficit widened to P378.2 billion in the first nine months of the year, Bureau of the Treasury data showed. This was 78% higher than the P213.1 billion shortfall in 2017’s comparable period.
GDP AND INFLATION OUTLOOK
Analysts believe it would not be easy to reach the government’s growth target this year. To reach the lower end of the government’s target, the economy needs to expand by at least 7% in the final quarter of the year.
ING Bank N.V. Manila senior economist Nicholas Antonio T. Mapa said growth will “likely fall short” despite the administration’s rapid spending.
“[C]onsumption may provide less of a punch after consumers wilt under the double whammy of inflation and elevated borrowing costs,” Mr. Mapa added. “The export sector’s anemic performance despite supposed gain in competitiveness from a weaker currency will also keep a lid on our growth outlook.”
Meanwhile, RCBC’s Mr. Ricafort expects growth to be at 6.5%-6.7% this quarter saying that the chance of meeting this year’s goal is low due to the elevated inflation and local interest rates which could slow down economic growth.
For his part, UnionBank’s Mr. Asuncion said growth could be at 6.6% this quarter. The chief economist also showed concerns that the target may not be hit due to higher-than-expected inflation, weakening currency and rising global oil prices.
“Moreover, delays in the massive infrastructure projects will not push the growth of the country,” Mr. Asuncion added.
Meanwhile, for LANDBANK’s Mr. Dumalagan, with expectations of slower increase in the price of widely-used goods in the remaining months of the year, consumer spending might accelerate and an improvement in capital formation may also be seen. He expects GDP to grow by at least 6.3% in the last quarter of 2018.
Asked about the factors that might affect economic performance this quarter and next year, the BSP cited the “stagnant output in agriculture; natural hazards (e.g. typhoons); high inflation and second-round effects; delays in the implementation of inflation-related mitigating measures, infrastructure and reconstruction projects, and delay in legislation of priority bills; legislation of restrictive employment protection; policy uncertainty in mining and; security risks.”
As for the external factors, the central bank said the “slower global growth, escalation of trade tensions, policy normalization in advanced economies, contagion risks from selected emerging economies, increase in global oil prices and build-up of financial sector risks and excessive credit growth” could impact the country’s performance.
For inflation, the BSP adjusted its 2018 full-year inflation forecast to 5.3% from 5.2% previously due to the increase in transport fares. By next year, inflation is seen to settle at 3.5% from 4.3%. For 2020, BSP expects prices to rise by 3.3% from 3.2%.
“[T]he forecast for 2019 was lower due mainly to the impact of the suspension of the excise tax on oil, impact of rice tariffication, decline in global crude oil prices and the monetary adjustment by the BSP, which resulted in a stronger peso and slower domestic liquidity growth,” the BSP said.
Below are the outlooks for each of the key markets:
EQUITIES MARKET
BSP: “Investors’ bullish outlook over the country’s economic growth and corporate earnings following the enactment of the TRAIN law in December 2017 and anticipation of higher government infrastructure spending due to the “Build, Build, Build” program is expected to provide further support to the main index. Furthermore, the planned integration of the fixed income exchange and equities market, a step to make domestic capital market more efficient and cost effective, is expected to make domestic financial markets more robust and more attractive to both foreign and local investors throughout the rest of 2018.”
UnionBank’s Mr. Asuncion: “A recovery in equities market is expected when inflation starts to ease. The market will be advanced by the strong earnings of domestic companies and the strength of US and Chinese corporations.”
LANDBANK’s Mr. Dumalagan: “Local stocks may bounce back in the fourth quarter, as investors’ risk appetite might improve following the rebound in domestic growth and the deceleration in local inflation. Rate hike concerns, however, may limit potential gains.”
ING’s Mr. Mapa: “[P]ositive as growth still seen above 6% and inflation slowing”
RCBC’s Mr. Ricafort: “PSEi could seasonally rise towards the end of 2018 (accounting year-end when there could be some window-dressing activities) and some bargain-hunting after recently trading near two-year lows, partly inspired by prospects of easing inflationary pressures that could fundamentally improve corporate earnings, valuations, and overall economic growth.”
FIXED-INCOME MARKET
BSP: “The Philippine government is expected to continue to source its borrowings from the local sector at about 80%, while the remaining 20% will be from external sources. This allows the government to take advantage of the liquidity in the Philippine financial markets and at the same time reduce the exposure to the risk of foreign interest rate movements.
With regard to bond yields, the Development Budget Coordination Committee (DBCC) maintained its 364-day T-bill rate assumptions at 2.5% to 4.0% in 2018. It also maintained the foreign interest rate assumptions as indicated by the six-month London Interbank Offered Rate (LIBOR) at 1.5% to 2.5% for the same period. In terms of credit spreads, volatility will be sensitive to domestic and external developments in the short term.”
Mr. Asuncion: “High interest rates tend to encourage investors to invest them in fixed-income securities like bonds. The upward pressure on yields is mainly due to inflation which consequently keeps upward pressure on yields.”
Mr. Dumalagan: “Domestic yields are expected to show some downward correction amid easing local price pressures and safe-haven buying amid lingering concerns about global trade. The drop in yields, however, might be short-lived due to the rate hikes of the BSP and the US Federal Reserve.”
Mr. Mapa: “May see yields move lower and inflation seen to taper off.”
Mr. Ricafort: “Local interest rates could continue to ease, after sharply rising to near-decade highs in the third week of October 2018, amid easing inflationary pressures (lower prices of food/rice amid increased importation, harvest season, and other non-monetary measures to increase supply and lower food/rice prices; lower oil/petroleum prices with huge rollbacks as global oil prices sharply declined in [the fourth quarter of] 2018 to near eight-month lows; stronger peso exchange rate among the best in three months in view of the seasonal increase in the conversion of OFW remittances for Christmas-related spending and tuition payments for [the fourth quarter of] 2018.
Most local interest rates have already eased by about -0.50 from their highs posted in the third week of October 2018 and still up by near +300 basis points since the start of 2018 and still up by about +500 basis points from the lows two years ago.
Proposed tariffication of rice imports and planned suspension of further hike on fuel/petroleum excise taxes scheduled in January 2019 (under the TRAIN Law) could help ease inflation, especially in 2019.”
FOREIGN EXCHANGE MARKET
BSP: “In the midst of challenging developments in the external sector (trade and capital flows) and the global market uncertainty (e.g., trade policy uncertainty, Brexit negotiations, geopolitical developments, and normalization in the US and other advanced economies), financial markets in Q4 2018 are expected to be broadly stable. In the foreign exchange (FX) market, the BSP continues to adhere to a market-determined FX rate policy wherein the value of the exchange rate and relative value of the peso is determined by the supply and demand of FX in the market. The BSP ensures there is orderly price discovery in the foreign exchange market. When warranted, the BSP stands ready to provide liquidity and ensure that legitimate demands for foreign currency are satisfied.”
Mr. Asuncion: “The peso is expected to start stabilizing due to surging remittance, although depreciation may still persist due to widening trade deficit, more capital investments and the massive infrastructure development program of the Duterte administration.”
Mr. Dumalagan: “The peso might move sideways against the dollar in the remaining months of the year, as improving local conditions may somewhat soften the impact of global trade concerns and the steady rate hike of the US Federal Reserve. Positive local developments may come in the form of easing price pressures, stronger fourth-quarter GDP growth, and more competitive interest rates on account of the BSP’s aggressive rate adjustments this year.”
Mr. Mapa: “[S]een to benefit from both structural flows (remittances and BPO) in tandem with capital flows (FDI, ROP issuance) but external environment will be the wild card”
Mr. Ricafort: “The widely expected seasonal increase in the conversion of OFW remittances to pesos in [the fourth quarter] for Christmas-related spending and some tuition payments could still lead to seasonal gains in the peso as well into the Christmas season.”
“Other emerging market currencies have corrected/strengthened vs. the US dollar recently after some weakness in the earlier part of 2018. This could also support similar gains in the peso.”

RCBC merger with thrift arm to be completed by July 2019

November 28, 2018 | 12:02 am

RIZAL COMMERCIAL Banking Corp. (RCBC) expects to absorb the operations of its thrift arm by the second half of 2019, which will provide the lender a bigger retail base while reducing operating costs.
In a plan of merger posted on the local bourse on Tuesday, the Yuchengco-led RCBC said its merger with RCBC Savings Bank (RSB) shall become effective on July 1, 2019, with the former assuming all assets and liabilities of the latter.
After the effective date, “RSB shall cease to exist and its legal personality shall be terminated,” with RCBC as the surviving company.
“Any net income earned by RSB from 1 January 2019 until the Effective Date shall be declared and paid as dividends to RCBC and any net loss incurred by RSB during the same period shall be absorbed and for the account of RCBC,” it said in a statement.
The plan of merger shall be subject to the approval of the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, the Philippine Deposit Insurance Corp., as well as the Bureau of Internal Revenue.
In September, the universal bank announced it will absorb RSB for “more efficient capital deployment” and “operational cost efficiencies.” In particular, RCBC said consolidating the two entities would mean “more efficient compliance with the Basel 3 liquidity ratios” set by the central bank.
The thrift bank is wholly owned by RCBC, with paid-up capital worth P3.19 billion.
In a separate disclosure, RCBC said it will hold a special stockholders meeting on Feb. 6, 2019 for the approval of the merger and the terms and conditions stipulated in the plan of merger.
The consolidation comes ahead of higher capital and liquidity requirements in line with global standards imposed on big banks which will take effect in January 2019.
RCBC posted a P3.2-billion net profit in the first nine months, down 5.9% from a year earlier. The country’s 10th biggest bank runs 509 branches and 1,593 automated teller machines nationwide as of end-September.
On the other hand, RCBC Savings is the third-biggest thrift lender with at least 154 branches and lending centers.
Shares in RCBC rose 1.77% to P25.70 apiece in Tuesday trading. — Karl Angelo N. Vidal

Hamilton’s Christine Allado, PPO headline Pen’s 35th holiday concert

November 28, 2018 | 12:02 am

FOR THE 35^th anniversary of its annual Christmas concert, The Peninsula Manila will be featuring Hamilton star Christine Allado, the Philippine Philharmonic Orchestra (PPO), and the UST Singers, among several other performers.
The concert will be held on Dec. 9, 5 p.m., at The Lobby.
The PPO will perform with guest conductor Ruggero Barbieri. The 2018 line-up stars Ms. Allado who has guest starred as Andrea Bocelli’s pop artist in his Cinema World Tour in Europe and Asia and is currently in HAMILTON: An American Musical in London’s West End; opera singers soprano Rachelle Gerodias (who is also Aliw Hall of Fame for Best Female Classical Performer) and tenor Arman Ferrer (an Aliw Awards nominee for 2017 Best Male Actor in a Musical for Binondo: A Tsinoy Musical).
Also performing is the University of Santo Tomas Singers, the only two-time winner of the Luciano Pavarotti Choir of the World trophy prize (1995 and 2010) at the Llangollen International Musical Eisteddfodd in Wales, United Kingdom.

Other guest artists are Benjamin Angeles who will perform the Marimba Rhapsodic Fantasie and the Pundaquit Virtuosi, a string orchestra established by Coke Bolipata that is composed of children of fisherfolk and farmers from San Antonio, Zambales.
“Our holiday musical program offers an opportunity for the public to enjoy music of the festive season by some of the world’s greatest composers like Vivaldi, Beethoven, Gounod, Rossini, Verdi, Bizet, and Tchaikovsky,” says The Peninsula Manila General Manager Mark J. Choon.
Freddie Santos directs the concert.
There will be a P2,200 consumable fee (inclusive of taxes) with selections from a festive season merienda menu. Table reservations for parties of 10 at The Lobby are also accepted at P30,000 (inclusive of taxes) that comes with a set festive merienda menu for 10 and two bottles of Moët & Chandon Champagne. Booking dates are until Dec. 8.
Concert proceeds raised will be partially donated to the continuing efforts of the Hope for the Philippines fund that benefits the educational and livelihood projects of the families living in The Peninsula — Gawad Kalinga (GK) Village in Tanauan, Leyte.
For inquiries call 887-2888, extension 7410, e-mail diningpmn@peninsula.com, or visit the website peninsula.com.

BSP updates rules on client identification, dirty money

November 28, 2018 | 12:01 am

THE BANGKO SENTRAL ng Pilipinas (BSP) has updated its rules for validating client identity by accepting the national ID and the use of technology for verification.
Circular 1022 issued by BSP Governor Nestor A. Espenilla, Jr. likewise tightens rules to improve guards versus dirty money deals.
The 17-page issuance now puts in the manual of banks the recognition of the Philippine Identification System (PhilSys) ID card as an official document for financial transactions. This is on top of documents issued by other government agencies and school ID for students.
The PhilSys will assign a unique 12-digit number to Filipinos and resident aliens to serve as their digital identity across multiple platforms, while the ID is expected to replace most of the government-issued cards to simplify access to public and financial services.
The central bank has also included a person’s PhilSys number as part of the minimum information to be collected by financial players before carrying out a transaction, alongside one’s name, date and place of birth, address, contact number, nationality, and specimen signature or biometric for individual users.
To add, the BSP also included the use of information and communication technology (ICT) to “capture and record” personal data of customers, on top of the traditional modes of collection via photocopying or scanning of documents as well as the manual recording of information.
“The use of ICT in the conduct of face-to-face contact and/or interview may be allowed: Provided, that the covered person has measures in place to mitigate the ML/TF (money laundering/terrorist financing) risks and that the entire procedure is documented,” the central bank said.
Prior to this, the BSP required banks be “in possession of” identification papers from a prospective client.
The central bank previously approved the use of electronic know-your-customer procedures that allow banks and financial players to use online channels like video calls and geocoding to verify a client’s identity. This is expected to ease the burden on customers by making it more convenient to get bank accounts and transact.
The circular also requires a more comprehensive strategy for financial firms to combat dirty money. The central bank prescribed lenders to have a “group-level” Money Laundering and Terrorist Financing Prevention Program, which should be under the watch of senior management.
On a broader scale, the new rules also require players to comply with relevant resolutions made by the United Nations Security Council in conducting due diligence among customers, especially on the “prevention, suppression and disruption” of the use of weapons of mass destruction and its financing.
These changes come just as the Philippines is going through its third mutual evaluation carried out by the Asia Pacific Group on Money Laundering, and inter-governmental body which assesses whether safeguards installed by governments are sufficient to combat illicit money flows.
Last week, President Rodrigo R. Duterte issued Executive Order 68 forming a multi-agency coordinating body that will enforce the National Anti-Money Laundering and Countering the Financing of Terrorism Strategy 2018-2022. — Melissa Luz T. Lopez

Airlines move flights to New Panglao airport

November 28, 2018 | 12:01 am

LOCAL airlines on Tuesday are moving flights to the new Bohol (Panglao) International Airport following the closure of the Tagbilaran Airport, which used to be the main gateway to the Bohol island.
Following the inauguration of the new airport on Tuesday, the Civil Aviation Authority of the Philippines (CAAP) said in a notice to air men it is shutting down the Tagbilaran Airport and moving all official flight operations to Panglao starting Wednesday (Nov. 28) at 6 a.m.
AirAsia Philippines landed its first flight using the Airbus A320 at the new airport yesterday, when it sent CAAP officials to the inaugural event.
Philippine Airlines (PAL) and Cebu Pacific said in separate statements yesterday they will start operations at the Panglao Airport today.
PAL said it will give passengers a three-week transition period to adjust to the Panglao Airport — which is 40 minutes away from the old one — and will keep its ticketing office at the Tagbilaran Airport open until Dec. 15.
Cebu Pacific said it flies three times daily to and from Manila and Tagbilaran. Its subsidiary Cebgo flies once a day from Tagbilaran to and from Cagayan de Oro and Davao.
By Dec. 15, Cebu Pacific said it will start daily flights between Clark and Tagbilaran.
The new Panglao Airport was designed to handle 2 million passengers every year. It stands on a 220-hectare land, 10 times the lot size of the Tagbilaran Airport which occupies a 22-hectare area. — Denise A. Valdez

Bank stocks back on the menu after 3Q selloff

November 28, 2018 | 12:01 am

By Mark T. Amoguis, Researcher
WITH THE LOCAL stock market showing signs of recovery, investors may consider bank stocks as banks gradually reprice their loan portfolios following the successive interest rate hikes from the central bank.
The barometer Philippine Stock Exchange index (PSEi) gained 1.2% in the third quarter, a reversal from the 9.9% decline posted in the second quarter albeit slower than last year’s 4.2%.
On the other hand, the financials sub-index — which included the banks — continue to drop by 8.9% in the July-September versus the 1.2% growth notched in the third quarter last year. This was, however, slower than the 14.9% slump recorded in the previous quarter.
As of end-September, the sub-index slipped by 27.7% compared to the 18.4% growth recorded in the same nine months last year.
This gloomy downtrend was reflected the listed banks’ share prices during the July-September period with only two of the 14 listed banks registering quarter-on-quarter gains: Philippine Trust Co. (ticker symbol: PTC, 4.2%) and Philippine Bank of Communications (PBC, 2.3%).
Union Bank of the Philippines (UBP) saw the biggest drop in share price during the third quarter at 23.4%, followed by Security Bank Corp. (SECB, -23.0%), China Banking Corp. (CHIB, -14.1%), Philippine National Bank (PNB, -10.8%), and East West Banking Corp. (EW, -10.6%).
Rizal Commercial Banking Corp. likewise shed its share price by 9.6% as well as Metropolitan Bank & Trust Co. (MBT, -8.7%), Bank of the Philippine Islands (BPI, -5.9%), BDO Unibank, Inc. (BDO, -4.5%), Philippine Business Bank (PBB, -3.4%), Philippine Savings Bank (PSB, -3.0%), and Asia United Bank (AUB, -0.5%).
While the banks’ stock prices tumbled for the quarter, they managed to eke out earnings during that time.
Universal and commercial banks booked a cumulative P116.07-billion net income as of September. This was 9.2% higher than the P106.26 billion recorded in the same nine months of 2017, data from the BSP showed.
Net interest margin (NIM) — the ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income to average earning assets — improved to 3.15% in the third quarter from 3.11% in the second quarter and 3.06% in the same three months to September last year.
Higher interest rate environment that pushed banks’ funding costs was the main culprit for the quarter’s disappointing performance among bank stocks.
The Bangko Sentral ng Pilipinas (BSP) decided to tighten its policy rates to rein in inflation expectations early this year. The BSP’s Monetary Board hiked its rates by 25 basis points (bps) each in May and June followed by a back-to-back 50-bps increases in August and September. It then fired off a softer 25-bps increase in November. Benchmark rates now range between 4.25% and 5.25% starting Nov. 16.
“Investors dumped banks stocks for the most part in Q3 due to fears that higher market interest rates would be detrimental for banks’ margins, as most expected that funding costs would rise faster than the repricing in loans,” said Zoren Philip A. Musngi, research analyst at Mandarin Securities Corp.
“Most were also disappointed by the quarterly earnings, as banks saw lower trading gains due to the difficult economic and market environment,” he added.
“In general, higher interest rates caused the banks’ funding costs to increase. Likewise, this also caused most banks to book poor trading performance,” said John Martin L. Luciano, senior research analyst at COL Financial Group, Inc.
Rachelle C. Cruz, research analyst at AP Securities, Inc., shared the same view: “In Q3, improvement in lending yields and sustained loan demand are the positive factors, while lower trading gains and fee-based income due to languid performance of the capital markets as well as impact of higher policy rates resulted to decline in income from non-core business.”
Still, analysts remained bullish on the banking sector, believing that a recovery will be seen by next year on the back of gradual loans repricing due to soaring interest rates.
“Our long-term outlook for the banking sector continues to remain positive,” COL’s Mr. Luciano said, but added that the banking sector’s performance in the near term may be weighed down by continued policy rate tightening.
“Higher policy rate and tighter liquidity in the system will cause banks to raise deposit rates to attract funding, increasing the funding costs of most banks. Likewise, the higher interest rates will drag the trading performance of banks. Nevertheless, these risks should be tempered as loans gradually reprice,” he said.
For her part, AP Securities’ Ms. Cruz saw recovery in earnings per share towards next year.
“This is as we expect loan demand to still settle at the low- to mid-teens growth, while lending rates is expected to trend up as banks gradually reprice their loans,” she said.
“The negatives on trading portfolio were already recognized this year — thus, we see more sustainable earnings growth from banks next year as core lending business will be driving the recovery.”
RCBC Securities, Inc. Research Head Raul P. Ruiz was “overweight” on the banking sector.
“Profit growth is expected to accelerate for most banks because NIMs have been rising sequentially quarter-on-quarter. We expect this to continue until next year as the BSP has guided on further rate hikes. Consumer loans will accelerate as some banks resume lending to public school teachers and car purchases pick up after slowdown this year,” he said.
Justino B. Calaycay, Jr., research and engagement head at Philstocks Financial, Inc., was also bullish on bank stocks, especially on the so-called big three and those which are well-positioned to expand in this “elite group.”
“Government’s continued push for its projects and the easing of inflation concerns, and hopefully, more stability in domestic rates, should allow banks to operate in a lending/borrowing conducive environment,” he said.
Emeterio “Jojo” D. Gonzales III, president, managing director, and head of research at Philippine Equity Partners, Inc., was also optimistic: “We think the drag on earnings would be largely confined to 2018.”
BANKS: THE GOOD AND THE BAD
Despite being bullish on the sector, analysts noted the different performances among banks during the quarter.
“Negative standout was SECB that posted single-digit loan growth in 3Q of just 8%,” said Arabelle C. Maghirang, deputy research head at Papa Securities Corp.
“SECB was the most challenged by negative factors among our covered banks, with much of the weakness coming from higher funding costs, absence of trading gains, and increase in effective tax rate,” AP Securities’ Ms. Cruz said.
AP Securities’ Ms. Cruz saw some “green shoots” on BDO and BPI as net interest income grew strongly on the back of higher asset yields, with their respective current account and savings account ratios protecting NIMs.
She said that the growth of Ty-led MBT, whose net income attributable to the parent company surged by 55.5% in the third quarter, was due to a “low base” in the same period last year following a big jump in provisions.
“Otherwise, (MBT’s) earnings were just in line with our estimates,” Ms. Cruz said.
Meanwhile, Mandarin Securities’ Mr. Musngi said that smaller banks such as EW, UBP, and SECB were the ones that saw sizable declines in their performance due to weaker-than-expected earnings, affected by their higher exposures in teachers’ salary loans, difficult trading environment, and reliance on high-cost deposits.
He said despite being a big bank, SECB “saw a large drop in their stock due to the significant miss in earnings, which was driven by their outlook for lower net interest margins.”
“This was caused by the bank having a relatively weak deposit franchise, considering they have just recently ventured into the consumer business,” he said.
Papa Securities’ Ms. Maghirang said that positive standouts mainly were BDO, which was boosted by trading gains, and MBT, on the back of less provisioning costs.
For Mr. Ruiz of RCBC Securities, he said that one of the quarter’s best performer was PNB which reported its sharpest profit hike because of a P3-billion gain on the sale of real and other properties acquired.
On the other hand, he noted EW’s third-quarter net income, which fell 13% year on year, reflecting the suspension of salary loans to public school teachers in the first semester of the year, which reduced both its interest income and fee income.
OUTLOOK
Moving forward, analysts said that fourth-quarter earnings will provide additional boosts to the banks on the back of holiday spending as well as moderating interest rate hikes from the BSP.
“An expected upsurge in spending — including on credit — by both businesses as they beef up inventories for the holiday season, and for consumers as the cheer gets into higher gear should translate to increased activity for banks,” Philstocks’ Mr. Calaycay said, as this could help these institutions sustain the momentum of the first three quarters for “decent-to-impressive” results for the full year that could provide impetus to its share prices.
“We can see consumer lending and commercial lending as the drivers with fair contributions from trading and investments allowing for wider margins both at the top and bottom lines,” he said.
“I think overall investor sentiment and inflation expectations would play a large part in bank stock performance,” Mandarin Securities’ Mr. Musngi said.
“Bank stocks typically lead the market in a rally/rebound and in the scenario that [domestic] inflation shows convincing signs of slowing down. [I]t may prompt the BSP to tone down their rate hikes and pause their tightening,” he said.
“We anticipate banks with stronger/established deposit bases (such as BDO and BPI) to have an edge in this market environment, as they continue to post NIM improvements due to their asset-sensitive balance sheets.”
Mr. Luciano of COL Financial expects net interest income and fees to continue to drive earnings growth for banks toward the end of the year.
“I think 4Q would be more of the same…slowing loan growth, improved deposit growth, NIM expansion may be clearer as banks reprice loans in the wake of rising interest rates,” Philippine Equity Partners’ Mr. Gonzales said.
AP Securities’ Ms. Cruz expects the banking sector to post mid to high teens earnings-per-share growth in the final quarter led by the big three banks, which include BDO, MBT, and BPI.
“With the current interest rate environment, most of the growth is expected to come from the core lending business as banks take advantage of higher yields to increase their spread,” she said.
Papa Securities’ Ms. Maghirang was of the same view: “4Q earnings should be in line with consensus estimates, driven by core lending income and some potential boost from trading gains.”
She said that moderating interest rates could provide for trading gains in the quarter ending in December and further lift valuations.
“Potential cut in the BSP’s reserve requirement (now at 18%) could also raise stock prices,” Ms. Maghirang said.
RCBC Securities’ Mr. Ruiz said: “Investors will start to be more confident about earnings momentum of banks, which will be seen in quarterly net income results,” which will be buoyed by lending business primarily driven by small and medium enterprises and consumers.

Atlantis announces first workshops for 2019

November 28, 2018 | 12:01 am

THE FIRST round of workshops for 2019 by Atlantis Theatrical will include an Acting Masterclass with award-winning international theater, TV, and film actor Pinky Amador, but there will also be classes for beginners.
Amador’s masterclass is designed for professional actors and individuals with extensive non-professional performing experience. It will cover advanced acting techniques, and at the end of the course, students will receive a professionally shot demo reel that they can include in their portfolio.
Entry into the class will be determined via auditions. The class is open to ages 18 and up. Classes will be held Mondays, Wednesdays, and Fridays, 7-10 p.m., from Jan. 7 to Feb. 8 at the Mirror Studio, SJG Center, Kalayaan Ave., Makati City.
Newbies can take the The Basic Musical Theater Class, a month-long course for students who wish to enhance their singing, acting, and dancing skills. It includes into basic theater history, stage terminology, and fundamental theatrical concepts. It also introduces students to jazz dance performance and assists them in exploring vocal techniques for the stage. The class is open to adults, 18 years old and above, and will be facilitated by Steven Conde and Sarah Facuri. Classes will be held Mondays, Wednesdays, and Fridays, 7-10 p.m., from Jan. 14 to Feb. 23, at The 9^th Studios, Dominion Bldg., Arnaiz Ave., Makati City. At the end of the course there will be a recital on Feb. 23 at the RCBC Theater.
Finally, Atlantis will also be offering an Intermediate Musical Theater Workshop for students who have had experience in musical theatre performance and have basic knowledge of musical theater principles. It this course, students will delve into concentrated song and script analysis/text work, as well as intensive jazz dance training; be introduced to different schools of acting, stage make-up, monologues, and making a career in the theater. The course will also include a review of basic musical theater concepts and principles such as character study, improvisation, ensemble work and vocal technique. Students will be selected via teachers’ recommendation and/or a video audition process. The class will be facilitated by Cris Villonco and Nel Gomez. Classes will be held on Tuesdays and Thursdays, 7-10 p.m., from Jan. 15 to Feb. 23, at The 9^th Studios. There will be a recital on Feb. 23, RCBC Theater.
Slots are limited for all classes. Contact workshops@atlantistheatrical.com or 0917-838-1534 for inquiries.

How PSEi member stocks performed — November 27, 2018

November 28, 2018 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Tuesday, November 27, 2018.

Philippine Stock Exchange’s most active stocks by value turnover — November 27, 2018

Need for lateral thinking

November 27, 2018 | 11:59 pm

It’s about time. At long last, the government has embarked on a bold initiative to address our inability to produce enough rice for our own needs. The plan to work with the government of Papua New Guinea to cultivate rice and transfer rice production technology is promising. Papua New Guinea is reported to have fertile soil and lots of wetlands to make rice production effective, since it is expected to be more cost efficient. So, we are finally recognizing that despite our decades of obsession with attaining self-sufficiency in rice, we can’t seem to make it work. There is of course, climate change, with unpredictable weather conditions, exceedingly high price of fertilizers, our aging farmers (average age now estimated at 60 years) and lack of interest of the younger generations in grueling farm work, and, of course, the usual widespread corruption all the way down to agricultural field technicians.
Developing Papua New Guinea as an alternative source of rice makes sense in order to ensure that we have other options outside of Vietnam and Thailand which are rethinking their rice businesses toward higher-end varieties, branding, etc. We may have to pay higher prices for our rice imports if we don’t cultivate alternatives.
Yes, we can produce abundant rice given the right environmental conditions. But can the government actually produce it efficiently? Perhaps, if it partners with technical resources such as the University of the Philippines in Los Baños which supplies the scientists working at the nearby International Rice Research Institute. And if private business runs the show. I am skeptical about our chances of success if the government, which cannot maintain railways, or run government corporations without running them down to bankruptcy, is the way to go.
Vietnam’s An Giang Plant Protection Company, the successful Joint Venture of a private businessman who mobilized a multiple-stakeholder approach work in an “everybody wins” formula, is worth studying. Government provided land for research and start-up production, the agricultural school provided technical support, and European suppliers of technical inputs and equipment (chemicals, seeds, fertilizers, combine harvesters, etc.) at innovative and conciliatory pricing synergized to make this joint venture succeed in producing and selling rice to domestic and export markets (all the way to Africa).
An Giang introduced several innovations that are worth emulating: the JV did not own the land, the small farmers retained ownership. The Joint Venture supplied the seeds, chemicals, fertilizers at reasonable rates, payable upon sale of the rice outputs at current market prices. An Giang also provided rice milling and storage facilities, also payable upon sale of the rice outputs. Very significantly, An Giang also hired and provided agricultural field technicians and trained them in community relations so that they could become “farmers’ friends” over and beyond being technical advisers.
Proof of An Giang’s success was the decision of a Swiss-based investment firm to invest in minority equity shares in the JV worth USD90 million. This is incredible given that Vietnam is a communist-run government.
thinking conversation brainstorming
The Department of Agriculture could benefit from organized consultations with academe, private entrepreneurs, and the government of Papua New Guinea toward formulating an approach that over the long term can result in an “everybody happy,” sustainable venture that can meet the multiple stakeholders’ expectations.
Perhaps the Secretary of Agriculture should also look into how our archipelagic nation, ironically surrounded by seas, can raise the productivity of our fisheries industry so that it becomes a prosperous contributor to our economy. Fisheries has been lagging behind manufacturing and services for many years. Perhaps the only time it became a significant contributor to our economic growth was when Malcolm Sarmiento was Director of the Bureau of Fisheries. Sarmiento (where is he now?) passionately pushed for acquaculture and marine sanctuaries to raise our productivity in fisheries. He also promoted sardine processing into bottled products in his home town of Dipolog. And look where we are now with even high end gourmet tuyo, branded, packaged, smoked tinapa, and other new gourmet products in our supermarkets.
There has been too much vertical thinking in our government approaches. Doing the same things over and over again, trying to just do the same things a little better each year. Obviously, we need more than that.
There is enough disruptive technology around the world to force us to wake up and anticipate the trends if we are to survive and hopefully, thrive.
I read recently that the Department of Science and Technology has been tasked with monitoring developments in information and communications technology. There seem to be threats to our Call Centers jobs over the long term with awesome developments in artificial intelligence, notably voice recognition. I hope Filipino IT experts such as Dado Banatao are being consulted on these.
The creative industries (film, fashion design, art, music, graphic arts, IT innovations) seem to be getting organized toward becoming a major force in our economic progress. Creative arts is something we seem to be naturally good at; and we should make serious efforts to develop these in our people, especially the youth. There are already too many lawyers, lawyering still considered a glamorous profession; and other career paths should be promoted instead.
In all of these enterprises, we need bold lateral, not vertical thinking.

Teresa S. Abesamis is a former professor at the Asian Institute of Management and an independent development management consultant.
tsabesamis0114@yahoo.com

Inflexible labor regulations have negative consequences

November 27, 2018 | 11:57 pm

After more than two years in office, the Duterte administration has not fulfilled its promise to end contractualization. Reports indicate that there are an estimated 1.3 million Filipinos who are contractually employed in the country. The efforts of the Office of the President and the Department of Labor and Employment had not been able to resolve the perennial problem of job insecurity. The President himself admitted that the Executive Order he issued last year was not enough and it’s Congress that should pass a legislation to ensure security of tenure for laborers.
As we await the passage of the Security of Tenure bill in the Senate, a Social Weather Stations (SWS) poll put the number of jobless Filipinos at 9.8 million as of September this year. This marks an increase of 1.2 million since June. Out of the estimated 9.8 million who are said to be jobless, 9.2 percent, or some 4.1 million, were retrenched; 8.4 percent, or about 3.7 million, voluntarily left their jobs; and 4.4%, or 2 million, are first time job seekers.
What this means is that while the Philippine economy continues to sustain an upbeat growth momentum for some years now, translating that growth into jobs still remains to be a major challenge.
Unfortunately, the slower economic expansion in the second and third quarter, driven by record-high inflation, has made more Filipinos less optimistic about getting a job within the next year. The same SWS survey revealed that net optimism on job availability declined by 8 points from 47 percent in June to 39 percent in September.
Clearly, the major challenge for the Duterte administration now is how it can meet its economic growth targets and at the same time ensure that the economic growth will create more sustainable jobs.
In a recent roundtable discussion organized by the independent think tank Stratbase ADR Institute (ADRi), some members of the business sector, labor experts, and employers group expressed concerns about the negative consequences of further tightening labor regulations on economic growth and the labor market.
Dr. Vicente Pacqueo, Philippine Institute for Development Studies fellow and ADRi non-resident fellow, said the current proposed amendments to the Labor Code in the pending bills are likely to “make labor markets more inflexible, uncertain, and inefficient.” He warned that the version of the consolidated bill will likely make employers “reduce employment and production levels in the short runs to remain competitive and profitable.”
Dr. Pacqueo said the “restrictive and costly regulatory environment” in the Philippines makes it less attractive to foreign investors compared to, say, Singapore, China and even Vietnam. He urged policy makers to focus more on securing the well-being of the workers and enabling them to adapt to the emerging trends and disrupting labor-replacing technology and innovations.
It’s important to note that amidst such fears related to job insecurity and declining public optimism to find stable jobs, the government is pushing for the second package of its tax reforms package, or the “Trabaho Bill.” The bill seeks to lower corporate income tax rate from 30 percent to 20 percent but intends to rationalize the current set of tax incentives given by various investment promotion agencies.
For prospective investors, this has no doubt brought a strong feeling of uncertainty over tax perks. Some manufacturing firms recently announced postponing their expansion plan until they know the fate of the Trabaho Bill.
As of May this year, at least 1.39 million people are directly employed in Philippine Economic Zone Authority (PEZA)-registered firms. But investment approvals in the agency dropped by 55.9 percent in the first semester of 2018 compared to the same period last year.
The Japanese Chamber of Commerce and Industry and the European Chamber of Commerce in the Philippines (ECCP) also warned that the removal of incentives could send wrong signals to existing companies and prospective investors.
The proposed amendment to the labor code and the second tranche of tax reform package need to be reexamined to ensure that these measures can be a potent tool to create sustainable jobs and inclusive growth. The era of globalization calls for reforms in regulations and institutions to enhance the country’s competitiveness, promote flexibility in our labor regulations, and ease the burdens of investors in doing business in the Philippines in the long term.

Victor Andres “Dindo” C. Manhit is president of Stratbase ADR Institute.

The 11th Foreign Investment Negative List and its possible impact on online businesses

November 27, 2018 | 11:56 pm

Odds are that in the past week, you liked a friend’s post on Facebook, bought food from Food Panda, and booked a ride with Grab. I, myself, have done those things in the past couple of hours. This is indeed the age of E-Commerce and online businesses. You look at the Forbes list and at the top you’ll find Mark Zuckerberg, Jack Ma, and Jeff Bezos, who, by means of the internet, created billion-dollar internet-based businesses. These pervasive online businesses also affect more traditional business models. For instance, a giant retailer like Toys “R” Us has announced plans to close because of online stores like Amazon. Travel sites like Expedia have rendered travel agents unnecessary. Traditional cable and satellite TV services are fast becoming obsolete as people now choose to stream similar contents using sites like Netflix.
The Philippines is likewise cashing in on the trend with emerging websites like Lazada, Zalora, and OLX. However, at present, there are restrictions in place when it comes to online based businesses registered in this country and I believe the proposed 11^th Foreign Investment Negative List (FINL) will play a big role in the future of Internet businesses.
By way of background, last Oct. 2, 2018, the Business Inquirer published an article saying that the 11^th FINL is now up for President Rodrigo Duterte’s signature. Socioeconomic Planning Secretary and NEDA chief Ernesto Pernia said the Philippines will now allow up to 100 percent foreign ownership for internet-based businesses. He further stated that the proposed 11^th FINL, which contains a draft executive order, will no longer consider internet businesses as mass media.
online business
As it stands, the 1987 Constitution under Article XVI Section 11(1) restricts foreign ownership over mass media saying that it should be 100% Filipino owned. Moreover, Republic Act (R.A.) No. 7042, otherwise known as the Foreign Investments Act of 1991, and the Tenth Regular Foreign Investment Negative List provide that except for recording, no foreign equity is allowed in mass media. When the 1987 Constitution was passed, the Internet was not yet in existence and traditional mass media was limited to print and broadcasting. However, subsequent legislations and opinions of the Securities and Exchange Commission (SEC) now consider the internet and mobile technology as platforms for mass media.
R.A. No. 7934, otherwise known as The Consumer Act of the Philippines, defines “mass media” as any means or methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, mails and the like. Likewise, under R.A. No. 9211, otherwise known as the Tobacco Regulation Act of 2003, mass media is defined as any medium of communication designed to reach a mass of people. For this purpose, mass media includes print media such as newspapers and magazines, broadcast media such as radio and television, and electronic media such as the internet. These descriptions of mass media covering Internet platforms were reiterated by the Department of Justice in a 1986 opinion.
Several SEC opinions have now considered the internet and mobile technology as platforms for mass media and held that Internet-based platforms used for selling products are forms of mass media since the internet is used as a digital platform to broadcast information to the public. Relaxing this theory to allow foreign participation may change the internet-based business landscape in the Philippines.
Online based businesses would be ideal in the Philippines as nearly 60 million netizens have access to the internet. Many Filipinos spend a lot of their time on social media and online shopping. There are also more than 50 million Facebook users in the country. If the 11^th FINL is passed, e-commerce giants like Amazon, Alibaba, or eBay can expand their business in the Philippines and bring in more investments. Conversely, Filipinos will also have more options on what website or online businesses to avail of to suit their needs. Whether this is good or bad through nationalistic eyes is a whole other topic and as I ponder on this question, I will order a burger from Food Panda.
This article is for general information and for educational purposes only. It is not offered as and does not constitute legal advice or legal opinion.

Agustin P. Geraldez, Jr. is an associate of the Corporate and Special Projects Department (CSPD) of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
apgeraldez@accralaw.com

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