More foreign banks coming, says Fitch

MANILA, Philippines - Fitch Ratings expects more foreign banks setting up shop in the Philippines after the P36.9-billion deal between Security Bank Corp. and the Bank of Tokyo – Mitsubishi UFJ Ltd. amid the country’s sound macroeconomic fundamentals.

“We believe the Philippines’ promising growth prospects, backed by a young, English-speaking population and relatively low credit penetration make it an attractive investment destination for foreign banks and investors, and expect continued interest from foreign banks seeking an entry into the market,” Fitch said.

Security Bank and BTMU’s Mitsubishi UFJ Financial Group (MUFG) forged the strategic alliance last Jan. 14, making it the largest equity transaction involving a financial institution by a foreign investor in the Philippines.

“The tie-up could open up new business avenues to Security Bank in the form of trade finance, cash management and other lending opportunities to the Japanese business community in the Philippines,” Fitch said.

Fitch said the deal would strengthen the credit profile of Security Bank. It would also provide the mid-sized bank with access to the client network, product suite and technical know-how of Japan’s largest bank by assets.

The debt watcher cited the entry of Taiwan-based Cathay Life Insurance Co. Ltd. in late 2014 by spending P7.9 percent for a 20 percent stake in mid-sized Rizal Commercial Banking Corp. (RCBC).

Likewise, Fitch pointed out several regional banks sought branch licenses over the past 12 months to 18 months.

President Aquino signed RA 10641 in July last year amending the foreign banks law by removing the limit of foreign banks in the country earlier set at only 10.

Foreign banks under the new law have also been allowed to own as much as 100 percent of any local bank, removing the previous cap of 60 percent.