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Philippines’ top 1,000 firms post P17.8 trillion in revenues in 2023

Buildings are seen in Makati City, Dec. 17, 2024. — PHILIPPINE STAR /MIGUEL DE GUZMAN

By Lourdes O. Pilar, Researcher

THE TOP 1,000 corporations in the Philippines saw a 7.2% increase in combined revenues to P17.8 trillion in 2023, slowing from the previous year as elevated inflation weighed on economic activity.

The BusinessWorld Top 1000 Corporations in the Philippines report showed the firms’ aggregate gross revenue jumped by 7.2% in 2023 from P16.68 trillion posted in 2022.

The rate of increase was significantly slower than the 21.2% seen in the 2022 edition.

20 Top Grossing Companies in the Philippines

BusinessWorld defines gross revenue as the combination of net sales and nonoperating income.

Meanwhile, the top corporations’ combined net income rose by 13.3% to P2.04 trillion in 2023 from P1.8 trillion in 2022.

The financial performance of these large companies reflected the challenges faced by the Philippine economy in 2023.

Philippine gross domestic product (GDP) grew by 5.5% in 2023, slower than the 7.6% growth recorded in 2022, amid a drop in exports and state spending.

Inflation, which averaged 6% in 2023, also dampened consumer spending. Since May 2022, the central bank raised rates by a cumulative 450 basis points to 6.5% in October 2023.

On its 38th year, the BusinessWorld Top 1000 Corporations in the Philippines ranks private and public stock corporations based on gross revenue using the latest available full-year audited financial statements.

The latest edition of the Top 1000 had a gross revenue cutoff of P3.15 billion in 2023, 5.8% higher than the previous edition’s P2.98 billion.

Out of the 1,000 companies in the list, 683 posted higher gross revenues in 2023, 17.4% lower than the 827 companies in the previous year.

The report showed 591 companies saw net income growth in 2023, while 409 saw a decline in profit.

There were 58 firms that swung to a profit in 2023 after recording a net loss in the previous year, while 43 companies slumped to a net loss.

Meanwhile, 59 firms remained in the red.

Firms included in the Top 1000 list represented 18 out of the 21 major sectors under the 2009 Philippine Standard Industrial Classification (updated 2019).

Ten sectors reported at least double-digit gross revenue growth, with public administration and defense sector’s revenues jumping by 306.5% in 2023.

Meanwhile, the mining and quarrying sector’s revenues declined by 11.5% in 2023.

The manufacturing sector, which had 271 companies included in the list, accounted for 32.4% of the total gross revenue of the Top 1000 companies in 2023.

The services sector continued to be the main engine of Philippine economic growth, accounting for 55.2% of the aggregate gross revenue in 2023.

Multinational companies included in the Top 1000 list made P5.63 trillion, up 3.6% from the previous year. They accounted for 31.6% of the Top 1000’s gross revenues.

Exporting firms posted a 0.9% increase in revenues to P2.94 trillion, slowing from the 15% growth in the previous year. The sector accounted for 16.5% of the list’s total gross revenues.

In the latest edition, 35 corporations were first-time entrants, while 64 were returnees.

Petron Corp. maintained its status as the country’s top-grossing company in the Philippines in 2023, with P440.6 billion in gross revenue. It was up 0.4% from P438.87 billion the previous year.

The oil refiner and distributor also topped the list in terms of net sales with P435.96 billion. Petron’s net income rose by 151.7% to P6.38 billion, ranked 85th on the list.

Meralco came in second on the list, with gross revenue rising by 4.5% to P399.36 billion from P382.32 billion in 2022. It ranked second in net sales with P391.93 billion. The company posted a net profit of P28.33 billion in 2023, up by 30.6% from P21.69 billion in the previous year.

BDO Unibank, Inc. bagged the third spot as gross revenue jumped by 35.6% to P283.75 billion from P209.29 billion in 2022. The banking arm of the SM group ranked third in terms of net sales (P282.25 billion) and second in net income (P67.2 billion).

Also included in the top 10 were Shell Pilipinas Corp. (P256.2 billion in gross revenues); Toyota Motor Philippines Corp. (P216.18 billion); Mercury Drug Corp. (P193.92 billion); Philippine Airlines, Inc. (P183.63 billion); TI (Philippines), Inc. (P181.22 billion); Bank of the Philippine Islands (P166.92 billion); and Globe Telecom, Inc. (P157.04 billion).

The Top 1000 report has been providing a separate table to show how companies compare with each other on a consolidated basis.

With this consolidated table, readers will be able to see the impact of additional revenues coming from subsidiaries boosting a conglomerate’s rank.

Top Frontier Investment Holdings, Inc. and subsidiaries remained the largest conglomerate in the list of the top 200 conglomerates in 2023.

The holding company, which is the largest shareholder of San Miguel Corp. (SMC), posted P1.53 trillion in gross revenue in 2023, 3.4% lower from 2022. The conglomerate’s net income increased by 90.4% to P45.45 billion.

Listed diversified conglomerate SMC and its subsidiaries ranked second, with P1.53 trillion in gross revenues, down by 3.4% from P1.58 trillion in 2022.

Petron and its subsidiaries claimed the third spot with P804.97 billion in gross revenues, a 7% decrease year on year.

The rest of the top 10 conglomerates included SM Investments Corp. (P621.02 billion); Manila Electric Co. (P459.24 billion); San Miguel Food and Beverage, Inc. (P386.04); Ayala Corp. (P363.07 billion);  Mermac, Inc. (P358.44 billion); JG Summit Holdings, Inc. (P349.26 billion); and  Aboitiz Equity Ventures, Inc. (P345.15 billion).

The BusinessWorld Top 1000 Corporations in the Philippines can be purchased directly by reaching out to BusinessWorld’s Circulation Department at (+63 2) 8527-7777 locals 2651 to 2654 or via e-mail at circ@bworldonline.com. The portable document format (PDF) version will also be available for purchase at https://bworld-x.com/.

BCDA 2024 revenue tops P11B

THE Bases Conversion and Development Authority (BCDA) said it booked P11.3 billion in gross revenue last year, up 3%, with results driven by its joint venture (JV) deal for a mixed-use development in Taguig City.

In a statement over the weekend, the government-owned corporation described its revenue performance as “steady” and “positive.”

“This steady growth and positive financial performance was mainly attributed to the execution of a JV agreement for the development of the 6.1-hectare mixed-use development in Bonifacio Capital District in Taguig, which yielded an initial payment of P3.5 billion to the BCDA,” it said.

BCDA also cited the 39% increase in toll and airport concession revenue to P3.2 billion.

It also saw a 48% increase in dividends from affiliates to P1 billion.

“Through collaboration with partners that share our vision and efficient revenue generation efforts, the BCDA wrapped up 2024 as another banner year for the organization, sustaining its good financial performance over the years,” BCDA President and Chief Executive Officer Joshua M. Bingcang said.

“This is fueled by our mission to build world-class cities and implement game-changing projects for the benefit of the Filipino people,” he added.

For 2025, he said the BCDA expects to continue with revenue levels exceeding P10 billion.

 “We are committed to continue generating strong revenue, as this will allow us to boost our support for our beneficiary agencies and stakeholders, especially our military forces,” he added.

In a separate statement, the BCDA warned of the dissemination of inaccurate interpretations of the Supreme Court decision regarding the issue on Camp John Hay.

“Despite the clear language of the Supreme Court Decision, some persons in the guise of allegedly protecting the rights of third persons, have sought to disseminate misinformation and an inaccurate interpretation of the decision,” the BCDA said. 

“The BCDA advises everyone to be vigilant and read the Supreme Court Decision itself to correct any and all attempts at defrauding the public,” it added.

According to BCDA, the Supreme Court’s recent ruling allows BCDA to regain control over Camp John Hay, which is expected to attract new investment, open the site to all, allow redevelopment, and drive sustainable economic growth. — Justine Irish D. Tabile

Philippine energy companies upbeat as projects go online

PHILIPPINE STAR/MICHAEL VARCAS

By Sheldeen Joy Talavera, Reporter

SOME listed energy companies are bullish for growth this year as power projects that are expected to go online provide additional power supply to the grid.

“The year 2024 was a wake-up call, not only for the energy sector but for the entire country,” Antonio Miguel B. Alcantara, chief executive officer (CEO) at Alsons Power Group, told BusinessWorld in an interview. “The red and yellow alerts experienced across the country underscore the urgent need to enhance the Philippines’ power supply, demand management and transmission reliability.”

Last year, the Philippines’ main grids were placed under 16 red alerts and 62 yellow alerts, leading to brownouts.

“At Alsons Power, we are optimistic that 2025 will be another remarkable year,” Mr. Alcantara said.

The company is set to launch its first large-scale solar power plant as part of its plan to diversify its energy portfolio.

Alsons’ power generation facilities are concentrated in Mindanao. It has four power facilities with a combined capacity of 468 megawatts (MW).

Last year, the company started commercial operations of its first renewable energy project, the 14.5-MW Siguil Hydro Power Plant in Maasim, Sarangani.

“In Mindanao, the Department of Energy noted an adequate power supply outlook for the region,” Mr. Alcantara said. “Nevertheless, there is a pressing need to enhance generation capacity to address the expected growth in energy demand over the coming years, as well as to account for the frequent provision of power to the Visayas.”

Meanwhile, power distributor Manila Electric Co. (Meralco) cited the need to enhance its distribution network’s resilience and smartness through grid modernization projects, storm-hardening program and continued investments in advanced technologies, Executive Vice-President and Chief Operating Officer Ronnie L. Aperocho said.

This includes capital-intensive projects such as smart substations and the rollout of smart meters for Meralco’s eight million customers.

“With an upbeat economic growth forecast for the Philippines for 2025, we are optimistic that this will be mirrored in Meralco’s growth prospects, supported by our strategic efforts to invest, innovate and increase the value of the services that we deliver to our stakeholders, which include our customers and the country,” Mr. Aperocho said.

ACEN Corp., the listed energy unit of Ayala Corp., expects a “better supply situation” this year as large thermal plants start operations, along with new renewable energy plants in the next 12 to 18 months.

“Given the variable nature of renewables, we need to step up efforts to integrate more energy storage into the grid,” Eric T. Francia, president and CEO at ACEN, said in a Viber message.

The company has about 2,400 MW of renewable capacity in the Philippines, about 1,000 MW of which is under construction.

Mr. Francia said ACEN seeks to participate in the government’s green energy auctions and build up capacity to support the company’s retail electricity business.

“We aspire to further scale our renewable capacity in the Philippines by over three times for the balance of the decade,” he said.

Meanwhile, Alternergy Holdings Corp. sees 2024 as a “transformative year” as it managed to raise P20 billion in just 15 months as a listed company. This is expected to fuel the company’s growth and lay the groundwork to achieve its target of 500-MW capacity by 2026.

Last year, the company started building its three projects — Tanay and Alabat Wind Power projects and Balsik Solar Power project. Construction of the Dupinga Run-of-River Power project and the first phase of Kiangan Run-of-River Power project continue.

“We are bullish at Alternergy as we aim for the complete construction of four of our wind, solar and hydro projects by the end of 2025,” Vicente S. Perez, Jr., chairman at Alternergy, said in a Viber message.

The company is gearing up for the next phase of capital-raising to meet the equity needs of its project pipeline.

Energy projects covering 5,675.28 MW are scheduled to start commercial operations in 2025, according to data from Energy department.

Damosa Land bullish over Mindanao property market

RICARDO F. LAGDAMEO — DAMOSALAND.COM

By Beatriz Marie D. Cruz, Reporter

DAMOSA LAND, INC. is looking to expand in Mindanao through digitalization efforts and increased demand for “green” and sustainable projects, according to its chief executive officer (CEO).

“We’re always trying to be innovative,” Damosa President and CEO Ricardo F. Lagdameo told BusinessWorld in a Zoom interview. “We’re trying to bring in new ideas that we learn abroad, and even just from projects in Metro Manila.”

Mr. Lagdameo is a third-generation scion leading Damosa, the property development arm of Davao-based ANFLOCOR Group of Companies, which was founded by his grandfather, the late Antonio O. Floirendo, Sr. Damosa specializes in mixed-use, residential, commercial, industrial and tourist properties.

He noted how their real estate developments have integrated sustainability features in the structure and in the overall design of their townships. “Our buildings are now green. We try to use less material, meaning less cement.”

The Damosa Diamond Tower in Davao City has an Excellence in Design for Greater Efficiencies (EDGE) final certification for its environment-friendly features such as a green roof deck, solar power and rainwater harvesting.

Damosa properties also feature “sustainable communities,” integrating practices such as urban farming.

“In our townships, we have an abundance of things just growing all over the place which are edible,” Mr. Lagdameo said. “So, even when we turn over your house, you already have like a starter planter box where you can have things like vegetables and other produce.”

On Sundays, local farmers are invited to Damosa’s townships where they could sell their produce, he pointed out.

“We make sure that we’re being responsible with the projects that we choose, how we build them and what’s our contribution to the environment and the community,” Mr. Lagdameo said.

The company also has a roster of younger members that help modernize its processes, such as digitalization.

Damosa has been marketing its projects through sales videos, virtual tours and mobile apps to reach more buyers. This has also helped streamline internal office processes, improving the company’s operations.

The property developer is also looking at further expansion across northern Mindanao including in Cagayan de Oro to capture more investors.

“One of the questions that we always have is ‘Is there an available market for all the developments we want to do? And when we look at our projects, we’re not only looking at Davao City but we’re looking at the neighboring cities as well,” Mr. Lagdameo said.

Projects in Damosa’s pipeline include the Bridgeport Park, Kahi Estates, Agriya Gardens and its condominium-hotel project under the TRYP brand.

“Looking at 2025, it’s going to be a busy year, but it will be another fruitful one.”

Mr. Lagdameo cited optimism about the Davao property market mainly due to local infrastructure projects that are expected to drive up property prices.

These include the modernization of the Davao International Airport and the public bus rapid transport system.

Infrastructure development is also expected to improve mobility in the area, Mr. Lagdameo said, adding that this would solve the province’s growing traffic problem.

“Over the next few years, the properties that will be developed here will really benefit from all of that.”

Another unique selling point of the Davao property market is its easy access to key areas like beaches and mountains, Mr. Lagdameo said.

“When you’re in Davao City, you can actually invest in, say, a beachfront property that’s very close to the city.”

In contrast, in Metro Manila, one needs to drive to nearby provinces like Cavite and Batangas to access beachfront properties, he pointed out. “The range of products here is very diverse and you can get it all within the same city.”

Mr. Lagdameo said residential projects are the strongest for Damosa, making up about 70-75% of its revenue. Commercial projects have contributed as much as 30% to revenue.

While the revenue share of commercial properties is less than its residential segment, these have helped bring in more foreign investors, business process outsourcing firms and factories in the Davao region, Mr. Lagdameo said.

He said Damosa would focus on the Mindanao property market’s untapped potential.

“As a group, we have properties in Metro Manila and in some other areas of Luzon… Those are properties that we’ll definitely be developing, just not in the near-term future,” he said. “We don’t just look at where the hot markets are. We create the markets.”

PHL builders to benefit from state infra spending

PHILIPPINE STAR/JOHN RYAN BALDEMOR

By Ashley Erika O. Jose, Reporter

LISTED Philippine construction companies are expected to deliver strong results in 2025 — an election year — driven by increased state infrastructure spending, analysts said.

“[Construction companies] are set for growth due to the country’s favorable demographics, as well as preparations for the May 2025 midterm elections especially before the election ban,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

He said infrastructure projects are expected to be expedited before the Commission on Elections (Comelec) enforces a public works ban before the May 2025 elections.

He added that the expected rate cuts by the US Federal Reserve are expected to increase demand for loans from property developers and construction companies.

“Increased government infrastructure spending would benefit construction companies that are part of the supply chain of the various infrastructure projects around the country,” Mr. Ricafort said.

State infrastructure spending rose 2.52% in October from a year earlier, according to data from the Department of Budget and Management.

“Overall, the profitability outlook for 2025 appears cautiously optimistic, contingent on favorable economic policies and the execution of planned projects,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

He said the profitability of construction and infrastructure companies in 2025 depend on factors such as government infrastructure spending, private sector projects and macroeconomic conditions.

“The Philippine government’s ongoing infrastructure development through different initiatives can stimulate demand for construction services,” he added.

But the growth of the sector is expected to be underpinned by raw material costs including steel and cement, which are influenced by global markets and foreign exchange volatility.

Megawide Construction Corp. returned to profit in the third quarter, posting an attributable net income of P142.7 million from a net loss of P29.85 million a year earlier. Revenue rose 10.9% to P5 billion.

EEI Corp. had an attributable net loss of P31.75 million in the third quarter from an attributable net income of P406 million a year earlier as gross revenue fell 27.8% to P3.14 billion.

Phinma Corp., which has a construction material unit, posted an attributable net income of P144.86 million in the third quarter, 75.1% lower than a year earlier, even as revenue rose 0.5% to P6.61 billion. Gross expense increased by 2.4% to P5.5 billion.

Rice importers urged to bring in more 25% broken-grain varieties

PHILIPPINE STAR/MICHAEL VARCAS

THE Department of Agriculture (DA) said rice traders need to set aside a portion of their imports to grain with 25% broken content, citing the need to lower rice prices.

“By importing more rice with 25% broken grains, we can significantly increase the availability of affordable rice options for Filipino consumers,” Agriculture Secretary Francisco P. Tiu Laurel, Jr. said in a statement on Sunday.

Rice traders typically bring in varieties with only 5% broken grains, which are priced significantly higher compared to the 25% broken grain variety.

According to DA price monitors, as of Jan. 2, a kilogram of well-milled rice fetched P42-P52 per kilo in Metro Manila markets, while regular-milled rice sold for between P38 and P40 per kilo.

The DA has expanded its Rice-for-All rolling stores in public markets across Metro Manila, through the Kadiwa ng Pangulo (KADIWA) program. The Rice-for-All program sells well-milled rice to the general public at P40 per kilo.

To date, 26 KADIWA rolling stores and kiosks are serving consumers in various public markets in the National Capital Region (NCR) and selected Metro Rail Transit and Light Rail Transit stations.

“In addition to the KADIWA rolling stores and kiosks, 40 KADIWA Centers in NCR and Bulacan are also operational. These centers regularly provide basic necessities and prime commodities (BNPCs), Rice-for-All, and P29 rice for vulnerable sectors,” the DA added.

The DA is looking to expand its KADIWA network to 1,500 locations by 2028. It is expecting to open 179 KADIWA Centers by the end of the year.

“While the DA is working closely with millers and importers to bring more affordable rice options, we remain dedicated to helping rice farmers increase their productivity and maintain their profitability, “Mr. Laurel added. — Adrian H. Halili

SEC to follow phased timeline for sustainability reporting

PHILIPPINE STAR/RYAN BALDEMOR

THE SECURITIES and Exchange Commission (SEC) will gradually enforce revised sustainability reporting among publicly listed companies, the guidelines for which will be released this year, according to the corporate regulator.

“The implementation of the new guidelines will follow a phased timeline, with compliance requirements staggered across tiers of publicly listed companies to ensure a smooth transition,” it said in a notice posted on its website.

The SEC said 2024 sustainability reports due this year could still use the rules issued in 2019. Under the rules, listed companies must submit sustainability reports via a “comply or explain” approach that allows them to disclose corporate sustainability data when available, and provide explanations for items where there are none.

Since requiring listed companies to submit sustainability reports in 2019, the SEC said it has recorded a consistently high compliance rate, reaching 96% in 2023.

In October last year, the commission said the draft memorandum circular containing the revised reporting guidelines would require listed companies to submit reports in the sustainability reporting narrative and sustainability report form formats.

The corporate regulator also said it would create a web-based app to manage the sustainability reports.

The SEC will create the in partnership with climate data and analytics software firm Komunidad Global Services & Operations Philippines, Inc.

“The customized web application will streamline the data collection, verification, management, and analysis of sustainability data, improving the monitoring capabilities of the commission on sustainability reporting compliance of publicly listed companies,” the SEC said. — Revin Mikhael D. Ochave

LandBank, DBP capital issues post-Maharlika: Why the IMF is half-wrong and one year late

RA 11954 created the Maharlika Investment Corp. with its initial capital coming from the Land Bank of the Philippines (LBP, P50 billion) and the Development Bank of the Philippines (DBP, P25 billion). Contrary to the impression by the framers of the law that these equity contributions were just a portion of the loanable and investible funds of both state-owned banks, they are actually counted as deductions to capital (emphasis authors).

This fact was obvious to the Banko Sentral ng Pilipinas (BSP) and compliance and risk management professionals in the banking industry even before RA 11954 was signed into law. The negative impact on the capital ratios of the LBP and DBP were clearly discussed in this column of Oct. 23, 2023 (https://tinyurl.com/2bryoqyz).

More than one year later, now comes the IMF calling for the recapitalization of the LBP and DBP. (https://tinyurl.com/22xekz9d). This article shows that IMF statement apparently did not show any computation at the bank level, which lead to an erroneous statement with respect to LandBank.

This point is worth repeating, precisely because it was ignored or not appreciated by those giving advice to the lawmakers crafting RA 11954 — these equity contributions are counted as deductions to capital and not merely part of their loan or securities portfolio — following Basel 3 and the BSP rules provided in the Manual of Regulations for Banks (MORB).

The accompanying chart shows the impact on the LBP and DBP of the Maharlika investment to their Common Equity Tier 1 (CET1) and total Capital Adequacy Ratio (total CAR) numbers (Source: LBP & DBP Audited FS 2022, 2023).

LANDBANK CAPITAL RATIOS ABOVE REGULATORY MINIMUM
As the chart shows, the capital ratios of LandBank were still above the regulatory minimum immediately after it remitted its P50 billion equity contribution to Maharlika. Its regulatory minimum capital ratios ex-Maharlika were 10.20% CET1 and 10.73% Total CAR. This is an empirical matter that the IMF staff apparently did not review at the granular level before it issued its statement on the need to recapitalize LandBank so it could exit the regulatory relief.

This is the part that the IMF got wrong in its statement, based on numbers it apparently did not compute (or did not show such computations to support its statement). Put plainly, LandBank did not have to resort to any regulatory relief in meeting the minimum CET1 or total CAR.

LandBank quickly issued a press statement to note that the IMF statement on the need to recapitalize to meet regulatory minimum did not apply to it. That is indeed the case. On the other hand, this writer takes exception to the LandBank press release claiming that its capital ratio is healthy at 16%.

This is the wrong number on two counts:

1. The press release refers to the total CAR ratio, instead of the CET 1 ratio, which is the ratio to meet the regulatory minimum of 10%.

2. The number in the press release refers only to the total CAR (not CET1) before deducting the P50 billion equity investment in Maharlika. It should have shown the ratios after the Maharlika contribution.

As the chart accompanying this piece shows, based on numbers from the LBP audited financial statements, the correct ex-Maharlika numbers for CET 1 are: 10.2% for end-2023 and 12.23% end-2024. It clearly shows that LBP is above the regulatory minimum even after its Maharlika investment. There was absolutely no need for the LBP to be less than forthright or disingenuous and spin it to look better than it actually is. See the last two paragraphs below for the rationale.

SEVERE IMPACT ON DBP
During the year that it remitted its P25 billion contribution for Maharlika, DBP’s capital ratios went below the regulatory minimum of 10% (CET 1 at 7.4% and total CAR of 8.36%), using the 2022 audited financial statement (FS). These ratios in 2023 improved slightly to a CET 1 of 8.63% and a total CAR of 9.55% but remained below the regulatory minimum.

In remitting its P25 billion equity contribution to Maharlika, the DBP was complying with Section 6.2 of RA 11954, but at the same time it violated Article III Section 12 of the same law, which specifically states that its equity investment should not exceed 25% of its equity.

Similarly, the DBP was in violation of the General Banking Act (RA 8791) Section 24 which limits “equity investments in allied undertakings” to 25% of the bank’s equity. The same limits are contained in the corresponding provisions of the BSP’ MORB.

Complying with the General Banking Act means that with a total equity of P82 billion as of December 2023, the maximum amount that DBP was allowed by law to remit was only P20.5 billion (25% of P82 billion at the time of remittance).

Scenario: if the DBP earns another P6,755 in 2024 and its Risk weighted asset grows to 600,000, its CET 1 ratio would improve to 9.31%.

At this rate, CET1 will hit the minimum regulatory level of 10% by 2025 (assuming no additional regulatory deductions to qualifying capital).

To quantify the impact on the DBP of taking out P25 billion of its equity for Maharlika:

• They fell below the minimum regulatory capital, in violation of BSP’s MORB, the General Banking Act, and even the Maharlika Law (RA 11954) itself. By itself, this necessitated the need to recapitalize DBP, as called for by the IMF.

• The P25 billion in capital which was removed meant taking out P190 billion in lending capacity (on a leverage ratio of 7.5x – as computed in the DBP audited FS).

Instead of shrinking its loan book which it was forced to do, the DBP would have retained the lending capacity of P190 billion and would have earned incremental net interest income of P5.6 billion on a net interest margin (NIM) of 2.95% (actual for 2024), and improved its ROE to double digits. As a reference, the NIM of top unibanks is at least 4%. That is what economists call the “opportunity cost” of taking out money where it could have been deployed, into an entity where it cannot yet be deployed.

This the main reason why my October 2023 piece noted that the ideal scenario would have been a “capital call” scenario where the equity contribution is remitted only when the money is actually needed or when the projects to be funded are identified, and fully vetted.

As a result of the capital shortfall, especially for the DBP, there was news of a request for a regulatory relief from the minimum capital requirement and renewal of prior requests for dividend relief. This would temporarily suspend the declaration of dividends (at least 50% of the prior year’s net income) until the capital shortfall is addressed. Since any fresh capital infusion from the national government is out of the question, the capital build up can only be achieved through earnings.

HIDING IN PLAIN SIGHT, CURIOUS ACCOUNTING TREATMENT
Unknown to many, the equity investments of both the LBP and DBP in Maharlika are not recorded as equity as should be done according to International Financial Reporting Standards rules. Despite the money having actually been taken out of their balance sheets by the 4th quarter of 2023, the audited FS of both LBP and DBP do not show a reduction in their CET1 and total CAR ratios. Instead, the Maharlika equity is listed as Miscellaneous Assets, as a deposit for future subscriptions to shares of stock of the Maharlika Investment Corp. (MIC). The excuse: the corporate secretary of MIC has not yet issued the stock certificates for the said investments.

This begs the question: how long does it really take for the MIC corporate secretary to issue the stock certificates for equity investments it has already received? The annual FS audited by Commission on Audit is released at least six months after the calendar year, hence there was more than enough time (nine months) to issue the said stock certificates. Officials of both the LBP and DBP say that the COA has agreed to such accounting treatment. However, COA’s consent does not necessarily make such an accounting calisthenic correct, although they would expectedly assert it is just a “timing issue.” This writer doubts if reputable external auditors would agree to such an approach.

The “delay” in the issuance of MIC shares to LBP and DBP became a convenient excuse not to reflect the reduction in CET1 and CAR ratios in the annual reports. For a high-profile investment that hogged the headlines for most of 2023, this “classification” consigns it to an accounting whisper. So much for transparency, disclosure and good governance.

(Next: The Proposed Recapitalization of LBP and DBP via IPO — An analysis of the proposed amendments to their charters)

 

Alexander C. Escucha is the president of the Institute for Development and Econometric Analysis, Inc., and chairman of the UP Visayas Foundation, Inc. He is a fellow of the Foundation for Economic Freedom and a past president of the Philippine Economic Society. He is an international resource director of The Asian Banker (Singapore). Send feedback to alex.escucha@gmail.com.

Exclusive: Jetour du monde

T1 units on display just outside the Fuzhou Strait International Convention and Exhibition Center — PHOTO BY KAP MACEDA AGUILA

SUV specialist outlines aspirations at third global conference in China

HARD TO FATHOM that Jetour was once just an SUV model line of the considerable Chery Holding Group. Conceived almost exactly eight years ago and “upgraded to an independent brand” in 2021, it is positioned as a company of “equal footing” with the other brands under Chery. Today, the marque not only stands on its own but thrives in its home country and in many territories and markets around the world. As it obviously benefits from the history and girth of the conglomerate to which it belongs, Jetour is particularly honing what it considers to be its key products — SUVs, with keen attention to hybrid off-roaders (see interview below). The formula has apparently been successful to the tune of 1.4 million units sold over the course of 74 months since the brand’s launch, per Jetour’s reckoning. In 2023 alone, the company delivered 315,617 vehicles.

At its third annual (in as many years) global conference, Jetour brought close to 300 media practitioners, influencers, and owner representatives from all over the world to Fuzhou in China. The agenda was to flex its brand-specific manufacturing facility, reiterate and reinforce its image, as well as to show what’s in the pipeline — while underscoring that it is the “fastest-growing new Chinese SUV brand.”

This success is predicated on two “mature” product lines in “family travel” and off-road travel” SUVs, and Jetour is quick to point to commendations and recognitions in countries such as Saudi Arabia and Chile. The boxy, Defender-like T2 has been a global hit as well, and is said to be a domestic best-seller in China.

At the Fuzhou Strait International Convention and Exhibition Center, Jetour also rolled out a dizzying array of modifications and accessories that speak to the customization options of the T2. Capitalizing on its robust build, the imagination of designers ran even wilder because of the plug-in hybrid electric vehicle (PHEV) version or i-DM variant of the model.

Aside from the usual camping versions associated with rugged off-roaders, we saw a T2 (curiously called “Clear Serenity Through Deep Refinements”) that was decked with plush toys and featured mobile-game-inspired skin, a collab with the Discovery Channel complete with a cheetah depicted on its vinyl wrap and a tent on the roof, and, my favorite, “Coffee Mate” with a complete and well-appointed espresso bar in the rear.

A range of Jetour-branded apparel and merchandise was also available — serving to provide and promote excitement and loyalty while stoking the enthusiasm of owners, fans, and owners-to-be. Of course, this serves as a crucial, necessary image infrastructure.

The notion of “Travel+” has also been floated by the brand for a while now, and it promised to continue working on this, which embodies a “holistic” view of ownership, “aiming to better link owners worldwide, share travel experiences and tips, and create a truly global Travel+ owner community.” The brand added in an official statement, “Jetour will release its lifestyle brand and member benefits policies, offering a convenient and diversified travel experience via rich accessories collection and diversified member programs.”

The priority is “to become the world’s leading hybrid off-road brand” while elevating Jetour as the de facto off-road marque of China. As posited by Jetour Auto International President Ke Chuandeng, it should be what Jeep is to the United States, and Land Rover is to the United Kingdom.

Toward this aspiration, Jetour is very conscious about adhering to global yardsticks — particularly regional safety standards. It is touted to be a true global brand with eight research and development facilities all over the world, and boasts “top international suppliers” such as Bosch, Continental, Sony, Huawei, and DJI. Jetour also isn’t shy about the numbers it wants to realize by 2030: presence in 80 markets, 1,600 dealerships, and annual sales of 1.1 million units — with vehicles churned out by 19 overseas manufacturing facilities.

In the Philippines, we can expect the Jetour T1 — an “urban light off-road SUV” that is smaller than the T2 but shares its platform — to be launched within the year. Other models in various stages of development include the T0, T5, P5 (its pickup sibling), and T7 (which can “sail” on water for up to 40 minutes).

It’s clear that Jetour wants to continue impressing a global audience that is keen on seeing what toys the brand will bring to the table, and road, next.

Treasury bill, bond rates to track secondary market movements

BW FILE PHOTO

RATES of the Treasury bills (T-bills) and bonds (T-bonds) to be auctioned off this week may end mixed to track secondary market movements as the market continues to price in their inflation and monetary policy expectations.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers.

On Tuesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of five years and six months.

T-bill rates could mirror the week-on-week declines seen at the secondary market as players continued to price in their inflation and rate-cut expectations for this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Bangko Sentral ng Pilipinas (BSP) has cut benchmark borrowing costs by a total of 75 basis points (bps) since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. last month said that while they remain in an easing cycle, 100 bps worth of cuts this year may be “too much” amid inflation concerns. He said the BSP is “neither more dovish nor less dovish” and is open to delivering another cut in their first policy meeting for 2025.

Meanwhile, the Fed began its own easing cycle in September 2024 with a 50-bp cut and followed it up with 25-bp reductions at each of its November and December meetings, bringing the fed funds rate to 4.25%-4.5%.

Fed Chair Jerome H. Powell has signaled cautiousness about future cuts due to stubbornly elevated inflation, with US central bank officials seeing just two 25-bp reductions this year, down from previous expectations of about four cuts.

Meanwhile, Mr. Ricafort said the reissued seven-year bonds to be auctioned off on Tuesday could fetch higher yields as December Philippine inflation may have picked up from the month prior.

The bonds could be “fairly received” and fetch rates ranging from 6.075%-6.125% as this week’s offer volume is higher compared to previous T-bond auctions, a trader added in an e-mail.

A BusinessWorld poll of 13 analysts yielded a median estimate of 2.7% for the December consumer price index, within the BSP’s 2.3%-3.1% forecast for the month.

This would be faster than the 2.5% in November and mark a third straight month of acceleration. However, this would be slower than 3.9% in December 2023.

The Philippine Statistics Authority will release December and full-year 2024 inflation data on Jan. 7 (Tuesday).

At the secondary market, yields on the 91-, 182-, and 364-day T-bills went down by 6.54 bps, 7.8 bps, and 12.85 bps week on week to end at 5.8286%, 5.9730%, and 6.0491%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 3 published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond’s yield inched up by 0.21 bp week on week to 6.1418%, while the five-year paper, the tenor closest to the remaining life of the T-bonds to be offered this week, saw its rate rise by 1.32 bps to 6.1116%.

On Dec. 16, the BTr raised P15 billion as planned from its last T-bill offering for 2024 as total bids reached P46.74 billion, more than three times as much as the amount on offer.

Meanwhile, the reissued seven-year bonds to be auctioned off on Tuesday were last offered on March 26, 2024, where the government P30 billion as planned at an average rate of 6.237%, lower than the 6.375% coupon.

The BTr plans to raise P213 billion from the domestic market this month, or P88 billion via T-bills and P125 billion through T-bonds.

The government borrows to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy

China approves more genetically modified crops to boost yields, ensure food security

REUTERS

BEIJING — China has approved five gene-edited crop varieties and 12 types of genetically modified (GM) soybean, corn and cotton, expanding approvals to boost high-yield crops, reduce import reliance, and ensure food security.

The Ministry of Agriculture and Rural Affairs awarded safety certificates to the 17 crop varieties, according to a document on its website.

The approved gene-edited crops include two soybean varieties, and one each of wheat, corn, and rice.

The approved varieties include seeds from Beijing-based feed group Dabeinong and China National Seed Group, a subsidiary of seeds and pesticides maker Syngenta Group.

Unlike genetic modification, which involves inserting foreign genes into a plant, gene editing alters existing genes to enhance or improve the plant’s traits. Some scientists view gene editing as less risky than genetic modification.

China has also authorized the import of an insect-resistant and herbicide-tolerant GM soybean variety from the German chemicals firm BASF exclusively as a processing material, the ministry added.

Over the past year, China has increased approvals for higher-yielding GM corn and soybean seeds to raise domestic production and reduce grain imports.

China mostly imports GM crops such as corn and soybeans for animal feed, while cultivating non-GM varieties for food consumption. Many Chinese consumers remain concerned about the safety of GM food crops.

The safety certificates for the newly approved varieties are valid for five years, starting from Dec. 25, according to the ministry document. — Reuters

Celebrating Filipiniana

Barong-bomber jacket designer Jor-el Espina opens atelier

DESIGNER Jor-el Espina is celebrating his 20th anniversary in fashion in 2025, and he’s doing it in style.

In the last month of 2024, he opened his new atelier on the 7th floor of One Corporate Plaza building in Makati.

Prior to the opening last month, Mr. Espina told BusinessWorld that he used to conduct business from his condominium, while his clothes were sold in pop-ups in SM Aura and SM Mall of Asia, as well as the artisanal fair circuit during the “-ber” months. He’s already planning another pop-up in Rockwell for 2025.

“I really wanted an industrial-themed atelier that can be transformed into anything,” he said during the atelier’s opening last month. “I love to entertain also.”

Mr. Espina is best known for his viral barong-bomber jacket hybrids, which brought him to mainstream fame in 2017. His client list is as diverse as that design’s sources, with figures in both showbiz and politics. We expected to see a line of these bomber jackets during the opening, but instead wedding gowns and more formal dresses were prominently displayed at the atelier.

There was a long white shift in piña, hemmed with lace, while a similar sheath was completely overlaid with lace and strewn with seed pearls. Another gown had a tiered skirt, with the tiers made of lace outlined in seed pearls, which stood next to a relatively casual summer dress made of ribbons woven together like a banig (a native woven mat). Most striking of all because (or despite) its simplicity was a gown with a tiered skirt made with unbleached piña, with no embellishments.

He has been doing bridal gowns for quite some time, but it’s always been his little secret. “The inspiration of my ready-to-wear are still from the gowns that I made,” he said. “I’m still doing it — secretly.”

Mr. Espina talked about some of the difficulties in working with Filipino textiles, but how they’re all worth it in the end. What seem to be deficiencies and gaps in the manufacturing process are instead seen as chances for innovation. For example, “The length is (of a fabric is) short, or sometimes it shrinks when you wash it. But it has to be celebrated… it needs to be there.”

Mr. Espina is part of a cohort that made Filipiniana outfits cool and casual in 2010s, a trend which we’re happy to report is still going strong. “The awareness of the market is wide already,” he said. “Filipiniana is not just there to be framed. It’s meant to be seen, and to be worn.” — Joseph L. Garcia

Jor-El Espina Atelier Manila is located at 703 One Corporate Plaza, Arnaiz Ave., Makati City. For appointments, contact 0931-127-2802. Store hours are from 10 a.m. to 8 p.m. For updates, follow @jorel_espinaph on Instagram.

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