The central bank on Friday raised P100 billion as planned via an offering of short-term securities, with rates pushed higher due to geopolitical concerns arising from the Russian invasion of Ukraine. 

The 28-day bills of the Bangko Sentral ng Pilipinas (BSP) were oversubscribed, with demand hitting P148.75 billion.  

Tenders were also higher than the P135.4 billion in bids attracted in the Monday auction. The usual Friday auction for the bills was conducted Monday as Feb. 25 was a holiday. 

Accepted rates for the one-month papers ranged from 1.75% to 2.1%, narrowing from the 1.7% to 2.2475% range previously. This caused the average rate on the paper to increase by 2.81 basis points to 1.9492%. 

The 28-day bills together with the term deposit facility are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates. 

Yields on the central bank’s one-month bills increased Friday as market participants remained worried about the impact of the Russian invasion of Ukraine on oil and commodity prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message. 

The United Nations estimates the number of refugees fleeing Ukraine at 1 million, Reuters reported. Thousands are estimated to have died or been wounded in the biggest attack on a European state since World War II. 

As a result, market worries have centered on the supply of oil once sanctions bite against Russia, a major producer. The futures contracts for Brent crude and West Texas Intermediate, the benchmark prices for Europe and the US, respectively, hit multi-year highs of $119.84 and $116.57 per barrel Thursday before easing back towards the end of the trading session. 

Since the start of the year Philippine pump prices of gasoline, diesel, and kerosene have jumped by P9.65, P11.65, and P10.30 per liter, respectively. 

Mr. Ricafort said signals from the US Federal Reserve regarding their impending interest rate increase also caused yields to rise on BSP bills. 

Fed Chairman Jerome H. Powell said he will back a quarter point increase in interest rates at the Federal Open Market Committee’s meeting between March 15 and 16, Reuters reported. 

He said the Fed expects the conflict between Russia and Ukraine to cause elevated commodity prices. Ukraine is a major supplier of wheat. 

“What we know so far is that commodity prices have moved up significantly, energy prices in particular. That is going to work its way through our US economy,” he said. – Luz Wendy T. Noble 

Security Bank Corp. said net profit declined 7.2% in 2021 to P6.9 billion as net interest income fell and expenses rose, while loan-loss provisions narrowed sharply. 

In a disclosure to the bourse Friday, the bank said fourth-quarter net profit was up 171% at P2.1 billion as the economy opened up.  

“Our fourth quarter results benefitted from the easing of mobility restrictions and the resulting uplift of the economy. We are optimistic about economic activity in 2022, despite the Omicron impact in January,” Security Bank President and Chief Executive Officer Sanjiv Vohra said.  

Net interest income declined 10% to P27.5 billion in 2021, with the net interest margin – the difference between what it earns in interest from loans and what it pays out to depositors – dropped 27 basis points to 4.43%. 

Non-interest income dropped 53% to P9.4 billion, with the bank adding that 2020 results benefited from “extraordinary securities trading gains.” In 2021, service charges, fees and commissions rose 25.4% to P4.5 billion, while trading gains increased 34% to P3.7 billion. 

Operating expenses rose 8% from a year earlier, as the bank upgraded technology and personnel. This brought the cost-to-income ratio to 57.8%. 

The bank set aside P1.2 billion in provisions for potential loan losses in the fourth quarter. This brought loan loss provisions to P5.3 billion in 2021, much lower than the P26.4 billion set aside in 2020. 

Security Bank’s gross loan portfolio rose 1% year-on-year to P467 billion at the end of 2021.  

Retail loans, which accounted for a quarter of the loan book, declined 9% in 2021. Wholesale loans rose 5%. 

At the end of 2021, the gross non-performing loan (NPL) ratio stood at 3.94%, while the NPL reserve cover was 93%. 

Total deposits rose 19% year-on-year to P524 billion. Low-cost savings and demand deposits, which accounted for 61% of the total, grew 19%. High-cost deposits rose 18%. 

Total assets grew 7% year-on-year to P700 billion, while shareholders’ capital rose 1% to P125 billion. 

The bank’s capital adequacy ratio was 19.8%, while common Equity Tier 1 ratio was 19.1%. Both are above minimum regulatory requirements. 

In 2021, the return on shareholders’ equity was 5.57%. 

Security Bank shares closed at P113 Friday, down 80 centavos or 0.7%. – Luz Wendy T. Noble 

The Bangko Sentral ng Pilipinas (BSP) has issued standardized reporting requirements for operators of payment systems (OPS) and also required periodic independent reviews of such reports. 

Approved on March 1, Circular 1138 is authorized by the National Payment Systems Act, which allows the BSP to oversee and ensure the efficiency, safety, and reliability of the payments system, the central bank said. It also laid down penalties and sanctions for violations of the reporting standards. 

“This recent policy issuance is critical to the BSP’s determination of appropriate oversight interventions, formulation of responsive policies and regulations, as well as continuous development of the national payments system,” BSP Governor Benjamin E. Diokno said in a statement Friday. 

The mandatory reports relate to operations, including information needed by regulators for statistical, policy development, and supervisory purposes. 

OPS companies are also required to have a reporting system in place in times of emergency or weather disruptions that could affect the processing of transactions. 

The periodic independent review clause seeks to ensure reliability and effectiveness of the reporting, condicuted via either an internal auditor or an external party with expertise in information technology, data management, and regulatory compliance. 

“The appropriate frequency of such review shall mainly depend on the systemic importance, risk profile and business complexity of the OPS as well as the extent of recurrence of control weaknesses that cause reporting exception,” the BSP said.  

The BSP said OPS companies should retain their data and reports for at least five years. In cases where a financial institution becomes subject to investigation by the BSP for possible criminal, administrative or civil cases, relevant information will have to be preserved beyond five years until a final verdict has been reached. 

Penalties for erroneous, delayed, and unsubmitted primary reports can range from P300 to P3,000 depending on the type of financial institution. Meanwhile, violations committed in connection with secondary reports will draw fines of P60 to P600. 

“The penalties will accumulate until such time that the report has been determined compliant with the prescribed reporting standards,” the BSP said. 

Possible non-monetary sanctions including a first offense warning to top officials of the OPS company and a reprimand for the Chief Executive Officer (CEO) and the board for a second offense.  

For a third offense, the CEO may be issued a suspension order of between a month and a year depending on the gravity of the violation. The top official and members of the board may also be disqualified from the industry for further offenses and the Monetary Board will have the power to designate a manager to take over the operations.  

According to the BSP, 198 companies have obtained an OPS certificate of registration. – Luz Wendy T. Noble 

Moody’s Investors Service said it is withdrawing the long-term deposit rating of United Coconut Planters’ Bank (UCPB) due to its merger with Land Bank of the Philippines (LANDBANK). 

UCPB exits Moody’s coverage with a rating upgrade to Baa2 to bring it in line with its acquirer, which is a much larger state-owned bank. The stable outlook was also maintained, Moody’s said in a statement Friday. 

“Subsequently, Moody’s will withdraw the baseline credit assessment and the deposit ratings assigned to UCPB,” Moody’s said, with LANDBANK emerging as the surviving entity.  

UCPB had total assets of P347.4 billion at the end of 2020, while LANDBANK’s assets were P2.4 trillion.  

“Moody’s estimates the combined entity will be the second-largest bank in the Philippines, with a market share in assets of approximately 15% as of the end of 2020,” it said. – Luz Wendy T. Noble 

The peso weakened against the dollar after the government reported record levels of debt, and as a nuclear plant in Ukraine caught fire while under attack from Russian forces.   

The peso closed at P51.74 to the dollar Friday, against a P51.50 close Thursday, the Bankers Association of the Philippines said. 

It also retreated from its P51.34 close on Thursday last week. Financial markets were closed for a holiday on Friday, Feb. 25. 

The peso opened Friday at P51.65. The low was P51.75, while the high was P51.60. 

Dollar volume rose to $793.22 million Friday from $789.38 million the day before. 

Currency traders responded negatively to the fire in the Ukrainian power plant, which came under attack from Russian forces, a trader said in an email. 

The Zaporizhzhia power plant is Europe’s largest nuclear facility.  

Earlier in the invasion, Russia captured the site of the defunct Chernobyl power plant north of Kiev, which is currently an exclusion zone due to unsafe levels of radiation.  

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the market also absorbed news that the Philippines’ outstanding debt topped P12 trillion at the end of January. 

Preliminary data released by the Bureau of the Treasury indicated that outstanding debt hit P12.03 trillion, up 16.5% from a year earlier and up 2.6% month-on-month. 

The Treasury said the debt stock rose after another zero-interest loan from the central bank and an increase in borrowing from domestic creditors. 

As of end-2021, the debt to gross domestic product (GDP) ratio hit 60.5%, the highest since 2005. This also surpassed the 60% threshold considered as manageable by multilateral lenders for developing economies. – Luz Wendy T. Noble