Banks ramp up spending amid stiffer competition

MANILA, Philippines — Listed banks are ramping up their spending program for expansion and information technology projects this year to support the growing economy, and prepare for increased competition in the industry.

Ayala-led Bank of the Philippine Islands (BPI) has doubled its budget for capital expenditures to P6 billion this year to fund the expansion of its nationwide footprint, as well as for major information technology (IT) projects.

Based on the prospectus for its stock rights offering, BPI said P4.6 billion would be spent for bank premises, while P1.4 billion would be used for the purchase of furniture and equipment.

The 166-year old bank is investing heavily for ATM installations, renovation and relocation of existing branch premises, and establishment of new branches.

On the other hand, the country’s third largest bank in terms of assets allocated P2 billion for various IT projects.

“This covers investments in electronic systems to comply with regulatory requirements, investments in other systems, upgrades of existing systems, expansion of the bank’s channels, and investment in cybersecurity,” BPI said.

According to the bank, it would invest in cloud and mobility solutions as well as analytics. The bank’s commitments for capital expenditures would be funded out of cash flows from operations.

BPI said the budget for this year is double the P3.12 billion spent in 2017, P3.11 billion in 2016, and P2.76 billion in 2015. These expenditures were mainly related to buildings and leasehold improvements as well as furniture and equipment.

As of end 2017, BPI had a network of 945 branches including full service branches, express banking centers, and microbanking offices. The network included 682 BPI branches, 157 BPI Family Savings Bank branches, and 103 BPI Direct BanKo branches and microbanking offices.

Its overseas network includes one banking location in Hong Kong and two in London. BPI also has one representative office in Tokyo and another in Dubai. It also has four remittance centers in Hong Kong and maintains over 140 remittance tie-ups and correspondent relationships with over 50 banks and financial institutions globally.

On the other hand, Metropolitan Bank & Trust Co. (Metrobank) is spending P3- to P5-billion for its capital expenditures this year.

The country’s second largest bank owned by taipan George SK Ty said 60 percent of the budget would be for IT projects.

The Metrobank Group spent P4.65 billion for its capital expenditures in 2017.

Both BPI and Metrobank are undertaking fund raising activities by selling new shares to existing shareholders. BPI is raising P50 billion, while Metrobank is eyeing P60 billion from their respective stock rights offerings.

Likewise, retail and banking magnate Henry Sy has earmarked P11 billion for the capital expenditures of his banking empire, including BDO Unibank Inc. and China Banking Corp.

BDO, the country’s largest bank, has earmarked P9.2 billion for its expansion binge this year, while China Bank, currently ranked 7th, has allocated P1.8 billion.

There is increased competition in the banking industry especially with the entry of 12 more foreign banks after the industry was fully liberalized in 2014 by former president Benigno Aquino III.