Ayala banking merger to boost efficiency – S&P

MANILA, Philippines — The consolidation of Ayala-led Bank of the Philippine Islands (BPI) and its wholly owned thrift banking arm BPI Family Savings Bank could boost operational efficiency by eliminating duplication of the physical network, according to S&P Global Ratings.

In its latest bulletin, the debt watcher said the merger between BPI and BPI Family Savings Bank would provide a seamless customer experience amid the shift in behavior due to mobility restrictions brought about by the pandemic.

“The surge in popularity of mobile and internet banking due to COVID-19 has enhanced focus on having a robust digital infrastructure and rationalize the branch network,” S&P said.

The credit rating agency pointed out the merger would have a minimal impact on BPI’s credit profile of BBB+ with a negative outlook.

“That’s because we assess the bank at the consolidated level. The thrift bank is a wholly owned subsidiary and is fully consolidated into the banking group’s financials,” it said.

BPI Family Savings Bank is the largest thrift bank in the Philippines with an asset base of more than P300 billion, contributing 13 to 15 percent to BPI’s consolidated assets and profits. It houses the group’s consumer loans.

S&P said BPI’s management has cited reduction in the gap in regulatory reserve requirements (RRR) between commercial banks currently at 12 percent and thrift banks at three percent as a factor behind the merger.

The Bangko Sentral ng Pilipinas (BSP) has committed to bring down the level of funds banks are required to keep with the central bank to single digit by 2023.

BPI joined other big banks, including Rizal Commercial Banking Corp. (RCBC) which merged with RCBC Savings Bank and Philippine National Bank (PNB) which folded in PNB Savings Bank.

“We do not foresee a wave of consolidation in the thrift bank space yet. The 600-basis-point gap in RRR ratio is still significant for major banks to benefit from having a separate thrift bank subsidiary,” S&P said.

The debt watcher said banks would likely continue to take advantage of lower regulatory costs at thrift bank subsidiaries and house riskier loans with them.