Samson, Eizzel Marie C.
Financial Markets
BSA/AC201 TTh 12:00-1:30
BANK OF THE PHILIPPINE ISLANDS
About BPI
Founded in 1851, Bank of the Philippine Islands is the first bank in the Philippines and in the
Southeast Asian region. BPI is a universal bank and together with its subsidiaries and affiliates, it
offers a wide range of financial products and solutions that serve both retail and corporate
clients.
BPI's services include consumer banking and lending, asset management, insurance, securities
brokerage and distribution, foreign exchange, leasing, and corporate and investment banking.
The bank has a network of over 800 branches in the Philippines, Hong Kong and Europe, and
close to 3,000 ATMs and CDMs (cash deposit machines).
The establishment of BPI, originally known as El Banco Español Filipino de Isabel II, ushered in
the start of the Philippine banking and finance industry. The bank performed many functions,
from providing credit to the National Treasury to printing and issuing currency, making it in
effect the country's first Central Bank. BPI proudly carries on this tradition, financing many
private and public sector initiatives and enterprises in support of economic growth and nation
building.
BPI is acknowledged as a leading provider of financial services in the Philippines.
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Stock Information
Bank of the Philippine Islands (PSE: BPI) common shares are listed in the Philippine Stock
Exchange (PSE).
At P379.48 billion as of March 31, 2019, its market capitalization is among the highest in the
Philippine banking industry.
BPI is a member of the benchmark Philippine Stock Exchange Composite Index (PSEi).
Ownership Structure
BPI's founding shareholders were primarily charities and endowments associated with the
Roman Catholic Church, and its directors consisted of government officials and prominent
businesspersons, including Antonio de Ayala, a partner in the predecessor firm of today's Ayala
Corporation.
As of December 31, 2018, Ayala Corporation and its affiliates owned an effective interest of
48.6 percent in BPI. The Roman Catholic Archbishop of Manila (RCAM) owned 7.3 percent,
and 5.0 percent is owned by the various shareholders. Public investors held 39.1 percent, well
above the required minimum public float of 10 percent.
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Ayala Corporation owns 78.1% of Liontide Holdings Inc., giving it an effective interest of 15.7%
in BPI via this vehicle. GIC owns 26.2% of Liontide Holdings Inc., and an effective interest in
BPI of 4.4%.
Total Outstanding Shares
As of December 2018, the bank had 4,502,449,501 total outstanding shares.
Analyst Coverage
The following are the international brokerage houses and independent analysts of Philippine that
cover BPI's stock and financial performance on a regular basis. The list may change as the
houses make corresponding adjustments to their sector
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BPI Family sees strong loan growth despite higher prices due to TRAIN
The thrift lending arm of listed Bank of the Philippine Islands (BPI) is bullish on its loan
growth despite the effects of the tax reform [Link] a round-table discussion on Tuesday, Joaquin
Mari B. Abola, retail lending group head at BPI Family Savings Bank, Inc., said the lender is
look at “high double-digit” loan growth this year.
Mr. Abola added that fast turnaround time, as well as competitive rates, will drive the
growth of their loan portfolio.“Fast turnaround time is always a big driver. Rates [are] another
consideration,” he said, noting that obtaining the loan faster is more important for customers.
“We’re quite surprised because some of our competitors actually charge higher rates but
their turnaround time is fast so they were able to get away with it. When you look at it, a one-to-
two percentage point difference in rates, that will not impact a lot on the monthly amortization.
The more relevant point for the buyer is getting to their dream fast.”
On the other hand, BPI Family Savings Bank said the tax reform law will have a positive
impact for the lender despite the higher prices of oil and some cars.
“I think it’s going to be very positive,” Mr. Abola said. “We’re very encouraged because
what is really happening is that there’s much more money in the pockets of the average
employees.”
The Tax Reform for Acceleration and Inclusion Law (TRAIN), enacted as Republic Act
No. 10963, provided tax cuts and exemptions on personal income and imposed an additional
excise tax on petroleum, which came at a time of three-year highs for world crude prices.
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The new law also introduced additional taxes on cars, coal, sugar-sweetened drinks and a
host of other items, which has caused the prices of other widely used goods and services to
increase in past months.
Nicholas Antonio T. Mapa, economist at BPI, said consumers can still afford to buy cars
since the higher take-home pay compensates for the price increase.
“The additional purchasing power freed up by the TRAIN law should give potential car
buyers the ability to purchase vehicles despite the increase in prices, fuel and overall inflation,”
Mr. Mapa was quoted as saying in a statement.
Meanwhile, BPI Family Savings Bank’s retail lending group head also noted that they are
looking at offering loans for luxury motorcycles.“We want to go into big bikes. We still have to
study that, but that’s a very small market.”
BPI raises P25B via bonds
BPI said it decided to close the offer period on Nov. 19 — a day ahead of schedule — as
the order book reached P38 billion while achieving at the tightest end on the pricing range.
Proceeds from the fund-raising activity will be used to support the bank’s growth
objectives and expansion plans while diversifying its funding sources, it said.
This will also “address clients’ need for new investments with shorter tenors compared
with the long-term negotiable certificates of deposits,” BPI said in the statement.
“We are very pleased by the strong response to our peso bond offering,” BPI President
and Chief Executive Officer Cezar P. Consing was quoted as saying in the statement. “We are
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grateful that investors recognize our strong credit metrics and we are happy to meet their needs
for innovative fixed income products.”
Lenders can now raise fresh funds through corporate bonds with greater ease as new rules
do away with having to secure approval from the Bangko Sentral ng Pilipinas.
Metropolitan Bank & Trust Co. recently raised P10 billion via fixed-rate bonds, part of its
P100-billion bond and commercial paper program announced last month. This was the first ever
bond issue by a bank since the central bank liberalized rules on lenders’ fund-raising activities.
In May, BPI completed a P50-billion rights offer, with the proceeds funding its business
operations and expansion.
The bank also raised $600 million in August through a drawdown from its $2-billion
medium-term note program, which it said was the largest issuance by a local lender in the
offshore debt market.
The Ayala-led bank reported a P5.98-billion net profit in the third quarter on the back of
the double-digit expansion of its net interest income.
BPI shares gained P1.80 or 2.03% to close at P90.50 apiece on Tuesday. — K.A.N. Vidal
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BPI Family Savings not keen on merging with parent lender BPI
THE THRIFT BANKING arm of Bank of the Philippine Islands (BPI) is reluctant on
merging with its parent bank as it looks to continue taking advantage of the regulator’s smaller
reserve requirement for thrift lenders.
BPI Family Savings Bank President Maria Cristina L. Go said in an interview that “it is not yet
time” for the lender to merge with its parent bank.
“That’s something we always assess regularly. But as of this time, it’s not yet time to
merge BPI Family,” she said. “It would really depend on the economic and regulatory
environment.”
The Bangko Sentral ng Pilipinas (BSP) currently requires thrift banks to hold at least
eight percent of their deposits, much lower than the 18% requirement on commercial and
universal banks — which is considered to be one of the highest in the region.
The lower reserve requirement ratio (RRR) enables savings banks to place a bigger chunk of
their funds in loans and investments.
“That gap is quite large and it doesn’t at the moment makes sense to merge because we’re
able to leverage on lower reserve requirements,” Ms. Go said.
Ms. Go added that with the lower reserve requirements for thrift banks, BPI Family Savings is
able to provide its clients low rates and affordable deposits.
BSP Governor Benjamin E. Diokno earlier said he wants to trim big banks’ RRR,
describing it as still “very high.” He also signalled room for a percentage point cut in the ratio
“every quarter for the next four quarters.”
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In September, Rizal Commercial Banking Corp. (RCBC) announced it is set to absorb its
thrift banking unit RCBC Savings Bank to reduce operating costs and consolidate capital. The
merger is expected to be completed in the second half of the year.
Meanwhile, Philippine National Bank will also absorb its savings banking subsidiary
PNB Savings Bank, widening its exposure to retail and small business clients.
BPI Family Savings was the largest thrift bank in the country in asset terms as of end-
September 2018 with P271.52 billion.
The lender expects to post 10-15% loan growth for this year from a “flat” lending book in
2018, driven by housing and auto loans. — Karl Angelo N. Vidal
BPI Bond and LTNCD Issues
Peso Bond Program
On November 13, 2018, the Bank priced its offering of ?25 billion, 1.25 year fixed rate bonds
due March 2020. The fixed rate bonds will pay a coupon of 6.7970% per annum, payable
quarterly. The coupon represents a spread of 20 bps over the interpolated 1.25 year BVAL
government benchmark rate, and is at the tight end of the spread range of 20 to 40 bps
communicated to institutional investors during the institutional book-building period.
The offering supports the Bank’s growth objectives and expansion plans while diversifying its
funding sources. At the same time, the fixed rate bonds address clients' need for new investments
with shorter tenors compared to long-term negotiable certificates of deposits.
Due to the strong response from both retail and institutional investors, we closed the offer period
one day ahead of schedule as the issue was oversubscribed by 52%.
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US Dollar Bond Program
On August 28, 2018, BPI, rated Baa2/BBB- (Moody’s/Fitch), priced its maiden US$ 600-million
five-year Senior Unsecured Fixed Rate Reg S Notes under its US$2 billion Medium Term Note
Programme. This issuance marked a first in our 167-year history and the largest ever debut
issuance for a Philippine financial institution. We aimed to raise US$ 300 million to US$ 500
million from the transaction but, given strong investor reception, increased the size of the
offering to US$ 600 million. The deal was three times oversubscribed. The Notes were priced
with a coupon of 4.25% and a yield of 4.345%, offering a single digit to no new issue premium,
which is not typical for new issuers.
Long-Term Negotiable Certificates of Time Deposit (LTNCTDs)
On October 27, 2017, BPI launches its LTNCTDs worth Php5 billion with option to upsize, to
support the Bank’s expansion plans and to diversify funding sources while offering investors an
attractive investment instrument. The LTNCTDs have a tenor of five and a half (5½) years and
an indicative interest rate of 3.625% to 3.750% p.a. The final interest rate will be set prior to the
end of the offer period. Interest on the LTNCTDs will be paid quarterly. The minimum
investment amount is set at Php100,000.00 and in increments of Php50,000.00. ING Bank N.V.,
Manila Branch was tapped as the sole arranger of this deal and also acts as Selling Agent
together with BPI Capital Corporation and BPI.
Stock Rights Offer (SRO)
In May 2018, BPI raised Php 50 billion from its stock rights offering (SRO), the largest equity
capital markets transaction in our 167-year history. The SRO involved the issuance of
558,659,210 new common shares (a ratio of 1:7.0594 common shares held or 14.2% of BPI
shares outstanding) to shareholders as of record date. The SRO received strong support from
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both domestic and foreign shareholders, and was oversubscribed by 22.3%. The SRO cemented
our position as one of the best capitalized banks in the Philippines, increasing our Common
Equity Tier 1 (CET1) ratio from 11.84% to 15.19%.
BPI Posts Net Income of P11.03 billion in First Semester 2018
MAKATI CITY, Philippines ---- The Bank of the Philippine Islands (BPI) posted P11.03
billion in net income for the first half of 2018, 5.7% lower versus the same period last year.
Total Revenues of P37.22 billion were driven by strong net interest income of P26.21
billion in the first half of 2018, up by 11.5% on account of a 9.3 % increase in average asset base
and net interest margin (NIM) expansion of 8 basis points. Interest income from loans grew by
21.1% year-on-year driven by a 16 basis points improvement in loan yields. However, cost of
funds increased by 17 basis points for the period partly due to the higher documentary stamp tax
(DST) on deposits.
On a quarter-on-quarter basis, NIM expanded by 15 bps as a result of favorable loan
repricing and liquidity provided by the proceeds from the Bank’s recent Stock Rights Offering
which allowed for the paydown of more expensive time deposits. NIM increased from 2.91% in
Q1 to 3.06% in Q2.
Total loans stood at P1.22 trillion, higher by 15.7% year-on-year driven primarily by
strong growth in corporate loans and credit cards at 17.1% and 22.7%, respectively. Total
deposits reached P1.53 trillion, up by 7.2%, with current and savings accounts (CASA)
registering faster growth at 10.0%. The Bank’s CASA ratio stood at 75.3% while the loan-to-
deposit ratio (LDR) was at 79.7%.
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Lower income from securities trading, trust and investment management and assets sales
contributed to a 6.9% year-on-year decline in total non-interest income from P 11.82 billion in
the first semester 2017 to P11.01 billion in the first semester 2018. The Bank registered higher
revenues from credit card fees and rental income.
Provision for loan losses for the first semester 2018 amounted to P1.91 billion, 22.2%
lower than 2017’s first half. The lower provisioning level is based on the Bank’s Expected Credit
Loss models under PFRS9 which showed relatively benign increases in potential impairment
losses.
Based on BSP Circular 941, the NPL ratio increased slightly from 1.72% last March to
1.80% with a reserve cover ratio of 97.1% at the end of the first semester 2018.
Operating expenses which totaled P21.22 billion was higher by 16.3% year-on-year on
accelerated spending on manpower, premises and technology. This is to support the Bank’s
continued implementation of its digitalization strategy and its commitment to serve the self-
employed microentrepreneurs by expanding the network of BPI Direct BanKo branches. Cost-to-
income ratio was at 57.0% in the first semester of 2018, up from 51.6% the previous year.
The Bank’s holdings in securities totaled P303.06 billion, up only 4.9% year-on-year.
More than 90% of the securities portfolio was in Hold-to-Collect, and thus less exposed to
interest rate risk.
Return on Equity (ROE) was 10.8%, lower by 2.9 percentage points, and Return on
Assets (ROA) was 1.2%, lower by 19 basis points, compared to the same period in 2017.
At the end of the first half, the Bank’s total assets stood at P1.90 trillion, up by 10.8%, while
total capital reached P239.70 billion, up by 38.2% on account of the recent stock rights offering.
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Capital Adequacy Ratio (CAR) was at 17.29% and Common Equity Tier 1 Ratio (CET1) was at
16.40%.
Financial Highlights
The Bank’s net income from 2016 to 2018 increased by a CAGR of 8.2% as net interest income
and non-interest income increased by 13.1% and 3.1%, respectively. However, these
improvements in revenues were partly reduced by the higher impairment losses and operating
expenses whose 3-year CAGRs were up 7.4% and 11.0%, respectively.
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References
Bank of from the Philippine Islands (2015). About BPI. Retrieved September 1, 2019 from
[Link]
Bank of from the Philippine Islands (2019). Stock Information. Retrieved September 1, 2019
from [Link]
Vidal, K. (2018). BPI Family sees strong loan growth despite higher prices due to TRAIN.
Business World. Retrieved September 1, 2019 from [Link]
family-sees-strong-loan-growth-despite-higher-prices-due-to-train/
Vidal, K (2018). BPI raises P25B via bonds. Business World. Retrieved September 1, 2019 from
[Link]
Vidal, K (2019). BPI Family Savings not keen on merging with parent lender BPI. Business
World. Retrieved September 1, 2019 from [Link]
savings-not-keen-on-merging-with-parent-lender-bpi/
Bank of from the Philippine Islands (2018). Financial Highlights. Retrieved September 1, 2019
from [Link]
Bank of from the Philippine Islands (2015). Capital Market Issuances. Retrieved September 1,
2019 from [Link]
Bank of from the Philippine Islands (2015). BPI Posts Net Income of P11.03 billion in First
Semester 2018. Retrieved September 1, 2019 from
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[Link]
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