Banking during the best and worst of times

April 26, 2020

FOR  the first time in its history, Bank of the Philippines Islands  (BPI) met its shareholders for the annual stockholders meeting in virtual format. Current lockdown protocols have prevented an in-person meeting so last Thursday,  the bank’s directors, officers, employees, business partners and thousands of stockholders listened to the reports of Chairman Jaime Augusto Zobel de Ayala  (JAZA) and President/CEO Cezar P. Consing from the comfort of their homes. Corporate Secretary Angela P. Maramag just had to make sure that prior clearance for the virtual ASM was made with the SEC and that all reportorial requirements were uploaded to the company website prior to the meeting.

Earlier, we had a foretaste of the virtual ASM, when the immediately preceding monthly BPI board meeting was also conducted via ZOOM. Much, much earlier, the board decided to forego the distribution of hard copies of the 2019 Annual Integrated Report and to just distribute the same online.

Both JAZA and Bong Consing were very pleased with 2019’s financial and operating performance given the operating environment. By all metrics, BPI did quite well as evidenced by significant increases in profitability, asset base, loan portfolio, deposits, net income, net interest income, trading gains, net interest margin, return on equity and asset quality. (See uploaded audited financial statements). JAZA added that BPI also got very good marks from the regulators.

Consing talked of strategic directions and milestones during the year just ended.  He talked of significant strides made  in order to make  BPI more financially inclusive. He discussed the progress of BPI Direct BanKo, which in less than three years has risen to become the No. 2 Microfinance Bank, and of the bank’s SME lending business. He talked about BPI’s corporate social responsibility objectives (accomplished through BPI Foundation) and the bank’s support for the UN Sustainable Development Goals as reflected in its loan portfolio.

Consing reported that BPI actively tapped the debt and equity capital market “to increase the efficiency of our balance sheet…. reduce our funding costs…. diversify funding sources and take advantage of lending and investing opportunities.”

Consing proudly proclaimed that BPI has become one of the most digitalized banks. “Online transactions were up 50 per cent. 40 per cent of bank customers are enrolled in one or more of our digital channels, 25 per cent are regular digital transactors.”

Both JAZA and Consing see COVID-19 as the greatest challenge for the global and domestic economies.

“In the near term, COVID-19 has presented operational challenges to the banking industry. 20 to 25 per cent of the industry’s employees are at work either in the head office or in the branches.

Consing also reported that BPI granted 30-day deferrals of payment (90 days for COVID front-liners} even before the passage of the Bayanihan Act. BPI also donated a substantial sum to the Philippine Red Cross for the purchase of face masks and PPEs for  COVID front-liners.

What does the banking industry expect in the medium term? “The industry expects credit losses to go up as businesses and retail customers will all be impacted in several ways and in various forms by this crisis. Fortunately, the industry is in very strong shape. Capital adequacy ratios are so high so the industry can withstand this pandemic. There will obviously be a little bit of  reticence as more care is taken with credit risks getting higher.”

Consing noted an appropriate response from the Bangko Sentral. “The monetary authorities have responded by increasing liquidity and providing regulatory forbearance. The central bank governor introduced provisions that will encourage SME lending. Hopefully, that will help balance things out.”

So what will BPI focus on in 2020? “The year will require continued emphasis on managing risks as we expand our SME and consumer businesses for the long term, an invigorated focus on CASA deposit growth, a moderating of expense growth, continued reallocation of resources in favor of technology, and digital and new consumer space, and a determination to continue to upgrade customer service.”

Elected to BPI’s 15-member Board of Directors were Jaime Augusto Zobel de Ayala, Fernando Zobel de Ayala, Cezar P. Consing,  Romeo L. Bernardo, this writer,  Ramon R. Del Rosario, Jr., Octavio V. Espiritu,  Rebecca G. Fernando, Jose Teodoro K.  Limcaoco,  Xavier P. Loinaz, Aurelio P. Montinola III, Mercedita S. Nolledo, Antonio Jose U. Periquet, Eli M. Remolona, Jr., and Maria Dolores V. Yuvienco. JAZA thanked Gerardo Ablaza for his support since 2017. Ablaza has stepped down but will remain in the board of BPI Family Bank. Former Finance Secretary Ramon R. Del Rosario fills the position of Mr. Ablaza. Atty. Angela P. Maramag was designated Corporate Secretary.

Former Chief Justice Artemio Panganiban, Oscar Reyes and Delfin Lazaro, meanwhile, will continue to serve in the bank’s Advisory Council.

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