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What to see this week

2 films to see on the week of November 17-24, 2017

Justice League
Bruce Wayne enlists new ally, Diana Prince, aka Wonder Woman and together with Aquaman, Cyborg, and the Flash fight against a strong awakened evil and save the planet from catastrophe. Directed by Zack Synder, it stars Henry Cavill, Ben Affleck, Gal Gadot, Ezra Miller, and Jason Momoa. Brandon Davis of ComicBook.com wrote on Twitter, “Justice League is not a perfect movie. It has story ‘flaws” and a simple, CGI villain. But, more importantly, it gets the heroes right. Every member of the League is fantastic and it’s tough to choose a favorite. It’s a ton a fun, start to finish.”

MTRCB Rating: PG

Fall Back
Michelle has been through many failed relationships. To keep her from pain, she decides to come up with a back-up plan that includes her ex-boyfriend and current boyfriend. Directed by Jason Paul Laxamana, it stars Zanjoe Marudo, Daniel Matsunaga, and Rhian Ramos.

MTRCB Rating: PG

San Miguel’s Ang says PSALM was paid $4.8B as part of Ilijan contract

Ramon S. Ang — AFP

SAN MIGUEL Corp. (SMC) said it had paid through a subsidiary a total of $4.8 billion in various fees as of last month to Power Sector Assets and Liabilities Management Corp. (PSALM), contradicting claims made by the state agency that the listed conglomerate had been remiss in its obligations.

“This is clear proof that we religiously pay PSALM and honor our contractual obligation under the Ilijan Administration Agreement,” said Ramon S. Ang, president and chief operating officer of SMC, in a statement on Thursday.

The subsidiary is South Premiere Power Corp. (SPCC), the administrator of the 1,200-megawatt Ilijan power plant.

“The records will show that we have paid more than enough, and we religiously abide by our contractual obligation as administrator of Ilijan,” Mr. Ang said.

He said PSALM is net cash positive from its contract with SPPC, having gained P30 billion as of August 2017.

“How can they claim we still have underpayments and that they are losing money under the IPPA (independent power producer administrators) agreement?” he said.

In the statement, SMC said by the time the administration agreement with PSALM expires in 2022, it would have paid the agency a total of P384 billion or about $7.68 billion for the 20-year-old power plant.

SPPC had earlier filed a case against PSALM, claiming the latter illegally terminated its IPPA and treated the SMC unit as an administrator in default.

It said PSALM’s “willful breach of contract” was the result of a flawed interpretation of certain provisions related to its power generation payments under the agreement.

It added that SPPC had been pushing for consistency in the handling of power industry issues. It cited conflicting views between PSALM and the Energy Regulatory Commission (ERC) on where the power generated should be sold.

SMC said PSALM wanted SPPC to sell its power output to the wholesale electricity spot market (WESM) instead of distribution utility Manila Electric Co. (Meralco) to take advantage of the higher revenue with the higher spot market prices in November and December 2013.

During this two-month period, prices were at P15.56 per kilowatt-hour (kWh), it said. Current rates range from P2 to P2.50 per kWh as supply exceeds demand, it added.

“PSALM’s assertion could have spelled huge losses for both the PSALM and the SPPC,” it said.

“But the ERC, in its decision citing public interest, pointed out WESM’s volatile prices as the reason to avoid WESM as it also gave weight to the availability of continuous and reliable supply of electricity to [Meralco] customers,” it added. — Victor V. Saulon

Managers can be great motivators with these…

Our department managers are having difficulties in motivating our workers. What could be the most likely reasons for this? I think we got one major answer when we received an anonymous note from our suggestion box. The unidentified writer speculates that maybe “our managers are not motivated enough to do their job.” How could this be possible when we don’t hear it directly from our managers? — Just Asking.

What motivates people-managers to do their jobs to the best of their ability? The question is too complex for many people, and perhaps for the managers themselves. But the best answer can be summed in one sentence — you can’t give what you don’t have. If you, as a manager are not motivated, then how can you motivate other people?

Therefore, it’s a must that top management focus its attention on those in middle management — line supervisors and managers. If money is not a problem, as most managers are well-compensated, then how would you handle the situation of those who are demotivated, disengaged or simply coasting along? And how?

Let’s pause for a while to digest that. As I wrote in my column last week, I must reiterate that there are “Six reasons why employee cash rewards can fail” (Nov. 10, 2017) as I must tell you that material things, including money, are not the best motivator. So what works better than money?

One important thing to do is of course, to hear it directly from the horse’s mouth. There’s not much difference when you do the same thing with ordinary workers. If you can talk to your non-management workers, then the more reason you should talk to your management deputies.

Many psychologists would tell you that it has something to do with the need for achievement, the desire to do something better, or doing more with less, among other personal career targets as reconciled with the company’s goals.

Once again, what works better than money? But wait, you don’t really have to ask that question but rephrase or reframe it so the discussion can be elevated to a higher level. Try the following open-ended questions for size:

One, what makes you passionate working for this organization? There are no right or wrong answers here. Whatever is important to a manager, then no one can question that. David McClelland and David Burnham writes in Harvard Business Review that “managers fall into three motivational groups. Those in the first, affiliative managers, need to be liked more than they need to get things done. Their decisions are aimed at increasing their own popularity rather than promoting the goals of the organization. Managers motivated by the need to achieve — the second group — aren’t worried about what people think of them. They focus on setting goals and reaching them, but they put their own achievement and recognition first.Those in the third group — institutional managers — are interested above all in power.”

Two, what zero-cash management intervention you need? Because money is not a motivator, then how do you expect your own managers to exceed your expectations? At times, it boils down to giving the managers real autonomy, and not only on paper. For example, give them a certain amount of independence so that they can decide even on simple and mundane things, like approving workers’ application for sick or vacation leaves. After all, they’re responsible for the production target of their departments. If a department can’t meet its quota, who will be blamed? I’ve seen managers who are reduced to being glorified clerks who can’t even approve disbursements of P1,000 to buy office supplies.

Three, what would make you stay until retirement? This may not hold water if you’re talking to millennial managers, but, it’s always worth a try. If you know them well, you can expect them to say they prefer that top management exhibit a more democratic coaching style. Regardless of the age bracket, many managers, as well as their workers, don’t like their bosses to be authoritarian, coercive, or dictatorial. Managers, knowing they are also the boss on own turf, would want to be treated with respect.

It is important to understand that there’s not much difference in using the various motivational approaches on managers and on workers. What’s sauce for the goose is sauce for the gander.

elbonomics@gmail.com

Gross domestic product quarterly performance

ECONOMIC EXPANSION last quarter beat market expectations, the Philippine Statistics Authority (PSA) reported on Thursday, affirming the country’s place among Asia’s fastest-growing major economies and firming expectations among some analysts of interest rate hikes by next year. Read the full story.

Q3 growth beats market expectation

Agriculture output growth slows

By Janina C. Lim
Reporter

GROWTH of farm production eased last quarter from the preceding three months and a year ago as crops’ and livestock’s slower annual expansion and a smaller fisheries output offset an acceleration in poultry’s increase, according to data the Philippine Statistics Authority (PSA) released on Wednesday.

Agriculture output growth slows

Value of farm output growth slowed to 2.32% last quarter from 3.0% a year ago that was revised slightly upward from a preliminary 2.98% estimate.

Third-quarter growth was also the slowest in three quarters, with the first and the second quarters clocking 5.28% and 6.18%, respectively, while 2016’s fourth quarter saw a 1.11% contraction.

By sub-sector:

• crops — which accounted for 46.89% of the total value of farm output last quarter — grew by 5.18%, slower than the year-ago 5.22%;

• livestock — which contributed 18.37% — edged up a nearly flat 0.91% compared to the year-ago 4.03%;

• poultry — which contributed 17.34% — picked up by 3.41% from 2.52%;

• while fisheries — which made up 17.39% — fell by 4.27%, steeper than the past year’s -2.58%.

Rolando T. Dy, executive director of the University of Asia & the Pacific’s Center for Food and AgriBusiness, said the crops sub-sector remained a key driver notwithstanding a weaker year-on-year performance.

“Rice remained robust, but corn production turned negative from high positive,” Mr. Dy said in an e-mail on Wednesday.

In terms of volume of production, palay — which had the single biggest commodity contribution to total value of farm output at 17.01% — increased by 14.17% (compared to the year-ago 16.35%) to 3.39 million metric tons (MT) from 2.97 million MT in 2016’s comparable three months. “This was attributed to the increase in harvest areas because of early occurrence of rains and availability of water during the planting period in Cagayan Valley, Central Luzon, Western Visayas and Soccskargen (South Cotabato-Cotabato-Sultan Kudarat-Sarangani-General Santos City),” the PSA report read.

Corn, however, which had the fourth-biggest contribution to total value at 8.83%, fell 2.74% (compared to the year-ago 10.61% growth) to 2.59 million MT from 2.662 million MT a year ago.

Hogs, which had the second-biggest commodity contribution in value terms at 15.35%, edged up 0.91% (compared to 4.54% a year ago) to 527,600 MT from 522,840 MT.

Chicken, which had the third-biggest value contribution at 13.27%, grew 2.52% (from the year-ago 1.89%) to 411,060 MT from 400,950 MT.

Total value of agricultural production grew by 4.64% in the nine months to September, a turnaround from the 1.51% contraction in 2016’s comparable period, against an official 6-7% full-year target.

The farm sector generates about a fourth of the country’s jobs but contributes just a tenth to gross domestic product. PSA is scheduled to report official third-quarter PSA data today.

Economic expansion in Q2 faster than initially estimated — PSA

THE PHILIPPINE ECONOMY in the second quarter grew at a faster pace than previously reported, the Philippine Statistics Authority (PSA) said a day before it announces preliminary figures for the July-September period.

Gross domestic product (GDP) — the value of all finished goods and services produced in the country — increased by 6.7% in the April-June period, faster than the preliminary 6.5%, the PSA said yesterday.

This brought the first-semester pace to 6.6% from 6.45% initially, against the government’s 6.5-7.5% target for the year.

“The top three contributors to the upward revision were financial intermediation; construction; and real estate, renting and business activities,” the state statistician said in a statement yesterday.

According to the PSA, financial intermediation — classified under the service sector — grew by 9.1% in the second quarter, up from the initially reported 6.1%.

Real estate, renting and business activities similarly increased by 8.3% from the preliminary 7.9% while, under the industry sector, construction also rose by 7.1% from 6.3% previously.

The second-quarter 2016 revision comes ahead of today’s release of the preliminary estimate for third-quarter GDP.

A BusinessWorld poll of 11 economists and analysts late last week yielded an estimate median of 6.6% for that period, matching that of Moody’s Analytics.

Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in earlier reports as saying that full-year growth will likely settle around the midpoint of the government’s target band for 2017, with third-quarter growth hopefully outpacing that of the second quarter due to a rise in merchandise exports and government spending on infrastructure. — Mark T. Amoguis

Sept. remittances smaller; year-to-date flows up

By Melissa Luz T. Lopez
Senior Reporter

MONEY SENT HOME by Filipinos abroad dropped in September to a five-month low as Saudi Arabia sent more overseas Filipino workers (OFWs) back home under an extended repatriation program, the central bank reported yesterday, although year-to-date flows were still bigger than a year ago.

Sept. remittances smaller; year-to-date flows up

OFW remittances totalled $2.186 billion that month, slipping by 8.3% from the year-ago $2.383 billion, the Bangko Sentral ng Pilipinas (BSP) said.

September inflows were the smallest since April’s $2.083 billion remittances and reflected the steepest fall in over a decade since a 10.9% drop in April 2003.

The BSP said remittances from land-based workers slipped by 11.7%, offseting a six percent increase in money sent by those working at sea.

The decline was largely due to lower amounts sent by those based in Saudi Arabia, which saw thousands of Filipinos suddenly head home.

“[T]he decline in remittances could partly be the result of the continued repatriation of overseas Filipino workers under the Saudi Arabian Amnesty Program which started last March 2017,” the central bank said in a statement, noting that the repatriation program has been extended effective Sept. 26.

Citing data from the Department of Foreign Affairs, the central bank said that a total of 8,467 undocumented OFWs availed of the program, which allowed them to return to the Philippines without penalty from the foreign government.

The BSP also attributed the drop in remittances to terminated arrangements between global banks and money service businesses, with more of the former choosing to end correspondent banking relationships in the face of perceived increased risks.

Despite the slip in September remittances, the nine-month tally still grew to $20.781 billion, up by 3.8% from the $20.025 billion posted during the same period in 2016.

However, this was below the central bank’s forecast of a four percent growth for the entire year.

The United States remained the biggest source of remittances between January and September worth $6.963 billion, accounting for a third of the total.

Saudi Arabia came second with $1.895 billion, although 3.5% less than last year due the repatriation of illegal workers.

Other major sources of funds were the United Arab Emirates ($1.874 billion), Singapore ($1.311 billion), Japan ($1.084 billion), and the United Kingdom ($1.002 billion), the BSP said.

Remittances support household consumption, which drives more three-fifths of national economic output.

Yesterday’s data bared a 1.976% year-on-year increase in cash remittances in the third quarter, slightly faster than the second quarter’s 1.856% hike but still much slower than January-March’s 7.682%.

The central bank’s September remittance report came a day ahead of the Philippine Statistics Authority’s scheduled third-quarter gross domestic product report today. A BusinessWorld poll of economists yielded a 6.6% median forecast for the quarter, fueled by robust consumption and improving public spending.

Trump’s trade barbs push Asian nations closer to China’s orbit

NEW DELHI/SEOUL — For years, smaller nations in Asia have looked to the US to provide a counterweight to an increasingly powerful China.

ASEAN 50 logo

Under President Donald Trump, they are learning to fend for themselves.

Mr. Trump declared his 11-day swing through Asia a success before heading home on Tuesday, saying that “all countries dealing with us on TRADE know that the rules have changed.”

On each stop, he devoted most of his time to trade deficits, moving away from a US strategy since World War II to enhance economic linkages in Asia as a way of boosting security ties and deterring conflict.

The approach is a sharp contrast with former US President Barack Obama, who announced a pivot to Asia backed up by an increased military presence and the Trans-Pacific Partnership (TPP) trade deal.

Mr. Trump subsequently called for US allies to pay more for security, and immediately withdrew from the TPP.

The US’s emphasis on negotiating — and revising — deals that put “America First” is raising alarms in a region where China is already the top trading partner for most countries.

As frictions with the US grow under Mr. Trump, smaller countries are searching for new solutions to avoid becoming overly dependent on China for economic gains.

That was seen over the weekend when Japan, in particular, pushed to revive the TPP. The 11 remaining members announced a framework agreement on the pact while Mr. Trump was in Vietnam defending his decision to shun such multilateral agreements in favor of bilateral deals.

“The credibility of the US is going down, so regional actors are trying to do their own things,” said Harsh Pant, a distinguished fellow at the New Delhi-based Observer Research Foundation who has written books about defense policy in the region.

“That is now the new normal, where regional states will have to come up with new ideas and new solutions to regional problems, and the US will fit in where it can.”

Mr. Trump appears to want it that way.

In a meeting with Southeast Asian leaders Monday in Manila, he called for a “free and open Indo-Pacific.” The phrase reflects the US desire for India to play a bigger role in its security matters.

“We want our partners in the region to be strong, independent, and prosperous, in control of their own destinies, and satellites to no one,” he said.

Still, Mr. Trump’s focus on trade deficits risks doing just the opposite. Already over the past decade, the 10-nation Association of Southeast Asian Nations (ASEAN) has grown more reliant on China, which accounted for 15% of its total trade last year compared with 9.4% for America. Back in 2007, ASEAN traded more with the US than China.

South Korea, which agreed to revise its bilateral deal with the United States, is being pulled toward China under Trump and the longer term consequences are unclear, according to a person familiar with the country’s trade policy who asked not to be identified speaking about internal deliberations.

Too much reliance on China is potentially strategically dangerous, the person said.

China punished South Korea after it allowed the installation of a US missile shield to defend against North Korea, with Beijing restricting tourism and making life hard for its companies. While both nations agreed last month to move past the dispute, China hasn’t yet fully restored economic ties.

The South China Sea is another area where China can use its economic might to advance its geopolitical aims.

In Hanoi, Mr. Trump offered to broker a peace deal between China and Southeast Asian nations like Vietnam and the Philippines, which has already shifted toward Beijing under President Rodrigo R. Duterte.

“President Trump’s offer to be a mediator in the South China Sea was off-balance,” Michael Fullilove, executive director of Sydney-based think tank the Lowy Institute.

“Because you have a very significant power imbalance between China and its neighbors, mediation isn’t what’s required. Support from the US for those smaller Asian nations is.”

At the Asia Pacific Economic Cooperation summit in Vietnam, Mr. Trump and Chinese President Xi Jinping again laid out competing visions for globalization.

While Trump said he wouldn’t enter large trade agreements “that tie our hands,” Mr. Xi painted a picture of a global order that would bring collective benefits.

Smaller Asian nations also called for a more collective approach. Singapore’s Prime Minister Lee Hsien Loong said world leaders should ensure the economic benefits of globalization and digitization are “fairly distributed” to mitigate the “winner takes all” effect of technology disruption.

Government officials in the region regularly have said they want the US to engage rather than withdraw, according to Carlos Gutierrez, chair of Washington-based Albright Stonebridge Group and former commerce secretary under President George W. Bush. While Mr. Trump’s moves to undercut international agreements can disrupt business activity, the US retains a cultural advantage, he said in an interview in Singapore.

“In absolute terms, I think the US will continue to be a powerhouse,” Mr. Gutierrez said.

“We’ll lose some time, but I think it’s way too early to say this is the beginning of the long-term decline of the US.” — Bloomberg

Sy, Zobel families among Asia’s richest

By Victor V. Saulon, Sub-Editor

THE family of Henry Sy, Sr., the Philippines’ richest man, jumped to ninth place in the Forbes 2017 list of Asia’s Richest Families, the publication’s annual ranking of dynasties in the region that is once again dominated by India.

With a net worth of $20.1 billion, the wealth created by the Sy family in retail, banking and property propelled it to the top 10, from 17th place last year.

The Sys, along with the Zobels, are the only Filipino families included in Forbes list of Asia’s 50 richest families.

The Zobels, who own diversified conglomerate Ayala Corp., are ranked 43rd with a net worth of $6.13 billion. The family was ranked 37th in the 2016 list.

“Asia’s wealthiest business dynasties on the list have remained relevant and successful by producing new generations that push the company in often surprising directions. Some young scions are even charting their own paths away from the family business,” Forbes said in a statement to introduce the list.

The publication cited 29-year-old Howard Sy, a grandson of Mr. Sy, the patriarch of the country’s richest family.

“A former investment analyst, Sy started a 24-hour self-storage company called StorageMart a year ago, anticipating that the country’s condominium boom would create a demand for storage space. His company now operates two facilities in Metro Manila,” it said.

The Zobels, themselves, are the heirs of a business that was founded as early as 1851 — Bank of the Philippines. Ayala has since branched to real estate, telecommunications, water infrastructure, electronics manufacturing, power generation, health care and education, among others.

Missing in this year’s list is a third Filipino clan that was in last year’s ranking — the Aboitiz family. Last year, it ranked 39th with a net worth of $4.95 billion. This year’s 50th wealthiest has a net worth of at least $5 billion.

“Asia’s 50 Richest Families list is a snapshot of wealth using stock prices and currency exchange rates from the close of markets on Nov. 3, 2017. Private companies were valued based on similar companies that are publicly traded. To qualify, a family’s wealth must be rooted in Asia and participation in building that fortune has to extend at least three generations,” Forbes said.

Topping this year’s list is India’s Ambani family, which reached that spot for the first time with a net worth of $44.8 billion, the publication said.

Forbes noted the collective wealth of Asia’s 50 richest families hit a record $699 billion, higher by 35% from last year.

“The Ambani family is this year’s biggest gainer in dollar and percentage terms. Their net worth rose by $19 billion as shares in Mukesh Ambani’s conglomerate Reliance Industries soared in the past year due to better refining margins and the demand produced by its telecom arm, Reliance Jio. Since its launch in 2016, Jio has notched up close to 140 million subscribers,” Forbes said.

South Korea’s Lee family dropped to no. 2 even if their wealth rose by $11.2 billion to $40.8 billion this year. The family derives nearly 45% of its fortune from Samsung Electronics.

Hong Kong’s Kwok family is in third spot with a net wealth of $40.4 billion. The Kwoks are Asia’s richest real estate family, controlling Sun Hung Kai Properties, which reached a record $6.7-billion in sales under contract for the year ended June 30, up 28% from the previous year, Forbes said.

Thailand’s Chearavanont family placed fourth, with a net worth of $36.6 billion. The family is behind Charoen Pokphand Group, one of the world’s largest producers of animal feed and livestock. Its wealth was boosted by nearly $9 billion by rise in the value of its holding in Chinese insurer Ping An.

“The cascading wealth of Asia’s very richest active tycoons is reshaping the ranks of even this legacy-driven list. Because of India’s size, the Ambanis can never be as dominant there as Samsung’s Lees have been in Korea. But with Mukesh’s next generation establishing a presence at the Reliance Jio telecom operation, this story could play out for years,” said Tim Ferguson, editor of Forbes Asia.

In all, India has 18 families in the list, followed by Hong Kong with nine, Singapore with five, Indonesia and South Korea with four each.

Yields on BSP’s term deposits up

By Melissa Luz T. Lopez,
Senior Reporter

YIELDS on term deposits climbed yesterday amid tepid demand, with banks reluctant to place their excess funds in a month-long term given uncertainties in the financial markets, particularly with a looming rate hike in the United States.

Tenders for Wednesday’s term deposit facility (TDF) totalled P114.346 billion, slipping from last week’s P124.081 billion as the 28-day tenor remained undersubscribed. This marked the third straight time when the bids logged below the P130 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to auction off, which has already been reduced from P140 billion last month.

Offers for the seven-day term deposits surged to P45.16 billion, a recovery from the previous week’s P37.57 billion and surpassing the P40 billion which the central bank placed on the auction block.

However, banks asked for higher yields for parking their excess money in the term deposits to hit a 3.4054% average, inching up from the 3.3849% rate fetched on Nov. 8.

In contrast, demand for the 28-day tenor slipped to P69.186 billion from last week’s P86.511 billion, against the P90 billion which the BSP dangled for the longer-termed instrument. Yields moved slightly higher to 3.4933% from 3.4908% previously, hovering close to the 3.5% ceiling.

Since June last year, the TDF has been the central bank’s main tool to capture excess liquidity in the financial system by allowing banks to place extra cash they hold, in exchange for a small return. Through this, the BSP expects to influence market rates to log closer to the 3% benchmark rate, coming from below the 2.5% floor of the interest rate corridor.

A central bank official said developments in the global markets have been influencing market sentiment, prompting players to take a cautious stance.

“[B]anks continue to go more short term in anticipation of the US Fed’s tightening bias,” BSP Deputy Governor Diwa C. Guinigundo said in a text message. “Banks appear to have been convinced of the BSP’s position that current monetary policy settings remain appropriate given the manageable inflation outlook, well anchored inflation expectations and favorable liquidity and credit conditions. It’s the external factors that seem to be uppermost in the calculus of the market.”

Yields on government securities have also been on an uptrend last week amid growing expectations that the global interest rates will pick up, largely due to an anticipated rate hike from the US Federal Reserve during their December policy meeting.

The central bank kept its trading, clearing and settlement operations open despite the Nov. 13-15 work suspension for the country’s hosting of the 31st summit of the Association of Southeast Asian Nations, with state leaders and dialogue partners visiting Manila.

Mr. Guinigundo previously said that there has been a “decline” in the amount of surplus money supply in the financial system, leaving banks with smaller amounts to deploy under the TDF. Offhand, the lenders may have chosen to place the idle funds for their lending activities, as well as in long-term notes offered by listed companies that offered more competitive returns.

For next week, the BSP will again be offering P130 billion in term deposits, split into P40 billion under the week-long term and P90 billion for the month-long tenor.

National Book Store drops backdoor listing

NATIONAL BOOK Store, Inc. (NBS) will no longer pursue a backdoor listing, leaving the shares of its target company tumbling at the equities market.

With NBS’s move, supposed listing vehicle Vulcan Industrial & Mining Corp. told the stock exchange the bookstore’s stake in the company would be unchanged.

“Despite NBS’s decision to no longer pursue the backdoor listing, its investment and subscription to shares in the Company shall remain unchanged. There will likewise be neither change in the composition of the Board of Directors nor in public float,” Vulcan said on Wednesday.

NBS is Vulcan’s top shareholder with holdings amounting to 850 million shares or around 58.6% of the total capital.

On Tuesday, Vulcan said NBS had informed the company that it was dropping the backdoor listing of its retail assets.

“After careful deliberation and many years of study, the board of directors of National Book Store group has decided to no longer pursue a backdoor listing of its retail assets to enable it to focus on various initiatives integral to the future growth of the business,” NBS Managing Director Maureen Alexandra S. Ramos-Padilla said in a Nov. 14 letter to Vulcan Vice-Chairman Christopher M. Gotanco.

Vulcan requested a one-hour trading halt to enable investors to digest the information.

Shares in Vulcan fell by 16.67% to close Wednesday’s trading at P0.75 each.

“As previously disclosed, Vulcan will revisit its strategy and continue to explore various ways to deliver value to our shareholders,” said Vulcan, a company is involved in finding, developing, and producing oil and gas reserves and other mineral properties.

“While there is no other agreement planned at this time, the Company assures the Exchange that it will make timely and proper disclosures should one be had with NBS or any other party in the future,” it added.

Vulcan previously said that the delay in the backdoor listing was because of prevailing market conditions as well as the audit being done by NBS.

In its 2016 annual report, Vulcan said the backdoor listing had been postponed “until further notice.” As of last year, the company had no commercial operations since it is only in the stage of exploration.

The company finished the third quarter with zero revenue while incurring losses of P1.46 million, smaller than the P1.67 million in the same period last year. Losses in the third quarter amounted to P417,491, up from P371,727 a year ago. — Victor V. Saulon

Moody’s Investors Service assigns investment-grade rating to UnionBank

MOODY’S Investors Service has assigned an investment-grade rating to Aboitiz-led UnionBank of the Philippines (UnionBank) with a “stable” outlook in line with the country’s own score, on the back of the lender’s profitability and strong core businesses.

The credit rater said in a statement yesterday that it gave UnionBank long-term local and foreign currency deposit and issuer ratings of Baa2, the same level as the sovereign’s grade.

It also assigned a long-term foreign currency senior unsecured medium-term note (MTN) program rating of (P)Baa2 to the lender. The Aboitiz-led bank likewise got a baa3 baseline credit assessment (BCA), while the counterparty risk assessment is at Baa2(cr).

Moody’s said its ratings are based “on its assessment that “the bank will receive moderate support from the [g]overnment of the Philippines (Baa2 stable) in times of need.”

The debt watcher said UnionBank’s baa3 BCA also “reflects the bank’s above-industry-average core profitability, which is supported by its growing lending operations, in particular, its higher-yielding retail business, and its superior cost efficiency relative to its domestic peers.”

“In addition, the bank’s BCA incorporates its adequate capital generation and track record of strong support from key shareholders,” it said.

It noted that the “above-industry-average profitability” has boosted UnionBank’s growth, with capital and asset levels remaining strong.

Still, the bank’s “above-industry” loan growth — at a compounded annual growth of 30% between 2014 and 2016 against the system’s 16% — “exposes the bank to unseasoned risk,” Moody’s said. UnionBank’s gross non-performing loan (NPL) ratio of 3.95% at end-September, the credit rater noted, is higher than that of its other Philippine banks.

“Over the next 12-18 months, its new NPL formation rate is likely to rise gradually as loans begin to season, but will remain manageable, given the robust operating environment in the Philippines,” the debt watcher said.

“Given management’s intention to pursue a more moderate pace of loan growth in 2018, Moody’s expects that the bank’s internal capital generation will be largely sufficient to support business growth,” it added.

Also cited as a weakness was UnionBank’s funding profile, which Moody’s noted had “a high concentration of high-cost large corporate deposits.”

“Depositor concentration rose over the first nine months of 2017 in order to fund its somewhat rapid loan growth. However, liquid assets — which represented 48% of the bank’s tangible assets at end-2016 — provide some support against downside risks,” it added.

Moody’s said it is unlikely to raise UnionBank’s credit grade ahead of the Philippines’ rating, “given the high correlation of risks between the bank and the sovereign.”

However, it noted that an upward revision of the bank’s BCA, as well as the sovereign’s credit rating, could result in an upgrade for the lender.

For UnionBank’s BCA to be raised, Moody’s said there must be “a consistent improvement in the bank’s asset quality,” a steady increase in core earnings, higher levels of loss provisions and an improved capital profile, as well as “a proven ability to diversify its funding sources and reduce dependence on high-cost corporate deposits.”

Meanwhile, the bank’s rating could be downgraded should its risk and credit profile worsen amid due to its continued rapid expansion, acquisitions, a weaker operating environment, an increase in non-performing assets, and a rise in its reliance on corporate deposits, among others, Moody’s said.

The debt watcher first issued ratings for UnionBank in 2004, but withdrew its credit assessments  back in 2007.

In its quarterly report released last month, UnionBank said it saw a plunge in its net income, booking P2.03 billion in the third quarter from the P4.22 billion it recorded in the same period in 2016.

Shares in UnionBank closed flat at P87 apiece on Wednesday. — K.A.N. Vidal

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