Bank of the Philippine Islands “Cautiously Optimistic” for 2010

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BPI ‘cautiously optimistic’ on prospects for 2010

Bank of the Philippine Islands

Bank of the Philippine Islands

Elections make forecasting difficult
By Doris Dumlao
Philippine Daily Inquirer
First Posted 22:50:00 12/07/2009

BANK OF THE PHILIPPINE ISLANDS (BPI) is “cautiously optimistic” on business prospects for 2010, banking on expectations of a faster pace of domestic economic growth and a sustained rise in corporate earnings while anticipating some uncertainties during the presidential election year.

The bank’s asset management and trust group, which has about P450 billion worth of assets under management, expects Philippine gross domestic product to grow 3.5-4.5 percent next year from at least 1 percent this year.

“In 2008, everybody thought it would be good and then it turned out bad. In 2009, everyone thought it would be bad but it turned out good. For 2010, we really don’t know what to think yet,” BPI president Aurelio Montinola III told reporters yesterday.

“Because on one hand, in a country point of view, how can you not do better than the 1-percent [GDP] growth [projected this year]? On the other hand, if you think about it, you have the elections. So in the first six months, the question will be whether election stimulus will offset government stimulus,” Montinola said.

As such, he said 2010 would be a “harder read” due to some extraordinary developments that buoyed business this year, such as the spike in car sales seen in October after the unprecedented flooding caused by Tropical Storm Ondoy as well as the sharp interest rate easing cycle seen in the first half of this year in the aftermath of the Lehman Brothers collapse.

For this year, Montinola said BPI would push for an expansion in the lending portfolio to small and medium enterprises (SMEs) and the consumer in order to hit a potential growth in business volume of 10-15 percent for next year.

About a third of BPI’s lending portfolio is now devoted to top-tier corporations, another third to the middle market/SMEs and another third to consumers.

“I think our lending is now very well diversified,” Montinola said.

But while lending to consumers or households as well as SMEs were expected to grow double-digit this year, Montinola said lending to top-tier corporations was likely to grow at a slower pace of 5 percent.

One reason for the expected softening of corporate lending, he said, was the development of the capital market which, in turn, had opened up more alternatives for corporations to raise funds—such as by issuing retail bonds instead of borrowing from banks.

“Also, with the elections people tend to hold back on capital expansion. What will continue is spending for working capitals,” he said.