RP banks must consolidate — SCB

A regional economist is strongly recommending that the Philippine banking system and its regulators to further consolidate to keep up with regional and global trends.

"Bank consolidation is not only a regional trend, it is a global trend as well," Mike Moran, Standard Chartered Bank (SCB) chief regional economist said.

Most leading Asian economies have already experienced solid consolidation after the 1997 Asian regional crisis, coupled with most national government’s slavaging of its banking system.

The Philippines was not spared when the banking system started consolidation both as an organic phenomena and with a little help from the state monetary regulators.

The Bangko Sentral ng Pilipinas (BSP) raised the minimum capital requirements for commercial, thrift and savings, and rural banks. That triggered consolidation in the commercial banking system while several thrift banks were reclassified as rural banks.

The rural banking system meanwhile consolidated and continue to consolidate as the country’s economy dictated the survival rate.

"It is difficult for the Philippines to buck that trend, much less go against it," Moran said. "Competition in the banking sector is a global phenomena, which is increasing and will continue to increase."

Key consolidations among the major commercial banks saw the Bank of the Philippine Islands (BPI) acquire the Far East Bank and Trust Co., Equitable Bank absorb PCI Bank, and the Metropolitan Bank and Trust Corp. (Metrobank) gobble up Solid Banking Corp.

But as the economy remains sluggish, the consumer market becomes more significant on a day-to-day basis over the corporate. Unfortunately, it is the market that the thrift banks thrive on and that is the same market that the commercial banks are massively courting.

"The pressure to have so many banks, crowing on the same market or space will be increasingly difficult. I think the Philippines must not buck the global trend," the regional economist stressed.

Commercial banks have in fact launched a massive advertising campaign to court the consumer market offering products ranging from auto loans, mortgage and housing loans, personal loans, comapny loans, and the like.

Others have started taking the small and medium enterprises (SME) market which before the financial crisis was unheard of.

The Chamber of Thrift Banks (CTB) have admitted that has started to take its toll on its members, espcially those located in the urban areas.

"We are slowly but surely being forced out of our main market which is the middle market, the SMEs and the retail market," CTB president Benjamin J. Yambao said in an earlier interview. Yambao said that the trend in the sector was to be effective niche players to remain competitive.

"Or else consolidation might be the order of the day," he lamented.