PBB expects ‘very challenging’ year ahead

YAO-LED Philippine Business Bank (PBB) sees 2017 to be a “very challenging” year amid recent market volatilities surrounding the US Federal Reserve’s hints of tightening policy rates anew this year, but with the thrift bank eyeing to balance its aggressiveness and risk aversion to counter these global uncertainties.

PBB President and Chief Executive Officer Rolando R. Avante told BusinessWorld in an interview that he sees this year to be “very challenging” amid an environment of rising interest rates following the Fed’s hint of raising borrowing costs anew by two to three times this year as the “predicted rate hikes might create a lot of market volatility.”

Asked what are the bank’s measures to cope with a jittery market, Mr. Avante said: “From our end, definitely it will be a balance sheet management exercise that we have to temper between [ having] a good balance of aggressiveness and risk aversion.”

He explained that relatively, a bank can’t be too conservative and aggressive at the same time in making business decisions, especially amid arising global market volatilities.

“So I think there should be a good balance between [ our] market acquisition and risk management,” Mr. Avante further said.

The Fed, in its Dec. 13-14 meeting, moved to increase interest rates to between 0.50% to 0.75% after most of its policy makers agreed on the thought that the US economy is poised to expand more quickly due to US President-elect Donald J. Trump’s proposed fiscal stimulus of aggressively spending on infrastructure.

With the threat of higher inflation rates due to the Trump administration’s fiscal policies and amid a growing and stable US economy, the US regulator dropped hints on the need for a gradual adjustment in interest rates by two to three times this year.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP), at its Dec. 22 policy meeting, kept local borrowing costs steady at 3.5% for overnight lending rate, 3.0% for the overnight reverse repurchase rate and 2.5% for the overnight deposit rate on the back of the country’s manageable inflation and robust economic activity amid heightened global uncertainties.

“On the local side, I think what makes it very challenging is the liquidity that has persisted in the market, so it will be difficult, especially for banks, on how you manage a situation such as that wherein there is huge liquidity but the rising interest rate scenario and the competitiveness in corporate, commercial and consumer markets in terms of lending rates,” Mr. Avante noted.

However, despite an uncertain operating environment, Mr. Avante said PBB’s overall growth for 2016 “will be better than 2015, moving forward, definitely we will strive to do better, then we will be challenged [for 2017.]”

The Yao-led thrift lender saw its bottom line post a 42% growth in the first nine months of 2016 to P670 million from P471.77 million the year prior, driven by favorable trading opportunities and stable growth in its balance sheet.

Mr. Avante said that the bank had a “very good” performance for 2016 and recorded “considerable growth” in its loan portfolio during the year as it had fully implemented its “re- engineering” in its lending business, meaning PBB’s loan portfolio is now more customer- centered unlike its account-management focus previously. The listed thrift bank’s loan portfolio is a combination of corporate and commercial loans.

“On a quarter- to- quarter basis, we should be showing a marked improvement, for the fourth quarter” in terms of nonperforming loans ( NPL), Mr. Avante added. He said that the bank’s NPLs were lower as of end- November compared to the figure recorded in end- September.

NPLs are soured debts left unsettled at least 30 days past due date.

The bank ended 2016 with a total consolidated branch network of 151 branches located across the country, the official earlier said.