SEVERAL banks in the country remain unfazed by the possibility of a Federal Reserve (the Fed) rate hike within the week on the back of a strong US economy.
Local lenders—universal, commercial and thrift banks—have expressed confidence in the industry’s resilience in case the Fed decides to adjust its policy rates.
Bank of the Philippine Islands Vice President Roland Gerard Veloso Jr. said the Fed hike would not be as significant as much as it is anticipated to be. He expects the movement to be just over 25 to 50 basis points, which will be gradually adjusted over time.
“The interest rates would likely move up with the Fed hike. I expect it to be up, but the key here, I think, is that the hike will be manageable. And the timing will also be adjusted,” Veloso said.
These Fed rates set the benchmark of the global financial sector for short-term lending and also serves as a guidance for long-term interest rates. These generally affect all lending and banking activities, such as autoloans and mortgage rates, deposits and investments.
In September the Fed held rates steady for the sixth straight meeting but hinted that the likelihood of an interest hike has increased.
For Security Bank, a Fed rate hike would only be business as usual, as the Dy-led bank does not see a higher dollar “to be a dampener” to its business and lending activities.
“We’re looking at no more than a 50-basis-point increase next year. If that happens, I think the markets, the economy, can easily absorb that,” Security Bank President Alfonso Salcedo Jr. said.
“We don’t see it dampening [our business] because rates have been really low and, again, the demand is there, the demographic dividend is there and we think that will sustain that.”
Philippine National Bank President Reynaldo Maclang also expects minimal effects, but said the bank has a solid deposit base to support any kind of unpredictability in the market, while additional measures will be implemented depending on its movement.
“That’s what we’re expecting, although not too much. Maybe a quarter of a percent. That’s what everybody’s anticipating. So we’ll see,” Maclang said.
Similarly, China Banking Corp.said its bank-lending rates will also have to follow the market movement and may possibly rise to account for the tighter money market condition.
“As for overall performance, we will stick to achieve 15-percent to 20-percent loan growth inspite of the tightening condition,” Vice president and Head of Treasury Benedict Chan said.
Meanwhile, United Coconut Planters Bank (UCPB) sees more growth opportunity in the coming year, as the bank had already anticipated the rate hike and had factored it into the management of its portfolio, pricing of products and budget calculations, according to SVP and Corporate Secretary Ildefonso Jim Jimenez.
“There will be marginal effects of a rate hike for UCPB’s lending operations. Domestic markets have factored in higher US interest rates in 2017 and, therefore, domestic lending has already adjusted. Given ample liquidity and tight industry competition, UCPB is positioned to perform better in 2017 compared to past years,” he said.
On the thrift banking side, RCBC Savings President Rommel Latinazo said lenders who are heavy on treasury operation should brace for any kind of impact as Fed rate hikes create different ripple effects that affect equities and bond markets.
Latinazo, who also heads the Chamber of Thrift Banks, said the thrift-banking industry would be influenced by the Fed hike depending on how it will affect domestic interest rates, as thrift banks are generally focused on lending businesses.
“My view is that, normally, when there is increase in rates the first to react would be on the deposit side, so it tends to increase deposit rates then the lending rates would follow. There would be a gap, probably, but it depends on how long that gap would last,” he said.
As for PSBank, the thrift banking arm of the Metrobank Group, President Vicente Cuna Jr. said the prospect of a rate hike has been discussed for a long time, as the bank has already priced it in their management.
Rolando Avante, Philippine Business Bank president, is, likewise, keying in domestic interest rates that will move alongside the reaction of the central bank to the Fed move while anchoring on possible opportunities along the horizon.
“Other factors will be liquidity, the competition among banks for client borrowers and the funding cost in generating deposit for lending. The bank will respond on how the market will react. We are looking to further expand market coverage for asset growth,” he said.
Avante added the bank is currently undertaking a thorough review of their balance sheet in preparation of the impending hike, as well as looking at the funding mix and addressing their respective loan books for the pricing and asset quality.
Earlier, Bangko Sentral ng Pilipinas (BSP) Governor Amado M. Tetangco Jr. said the central bank would not necessarily move in synch with the US Fed once the policy rates move up. However, Tetangco also noted the possible rate hike would be beneficial for emerging-market economies, like the Philippines.
In the third quarter of the year, the country’s GDP expanded by 7.1 percent from the same period last year, exceeding the 7.0-percent growth in the second quarter. Inflation was also up at 2.5 percent in November, which was up from 2.3 percent in October and the highest result recorded since February 2015.
“I think now the industry is in a wait-and-see stance. In the Philippines we have seen our GDP continuously growing strong. Fundamentally, I think we are in good shape, so that would mean hingher loan demand. Maybe not as quick as it could have been in the past, but I think the government is also doing its share by investing in infra, so that’s the multiplier effect,” said Veloso, who also serves as the HSBC senior vice president and head of corporate banking.
“The Philippines is in good shape but we also have to be more cautious because there’s more uncertainty now than the previous year,” he added.
Riz L. Jao, lecturer of economics and research associate for Eagle Watch at the Ateneo de Manila University, said in one of his columns in BusinessMirror the country’s robust economic growth, healthy current-account balance and strong domestic fiscal position will enable the Philippines to withstand global market uncertainties.