THE Bank of the Philippine Islands sees the Bangko Sentral ng Pilipinas (BSP) cutting rates twice this year.
Jose Teodoro Limcaoco, BPI chief executive officer said this is very likely given that inflation is “clearly under control” and market participants expect the initial cut by August, with the next one depending on the inflation rate for the rest of the year.
“Let’s put it this way. There are no hindrances to cut rates in August. Even the FX (foreign exchange) market seems to be very well-behaved. I was telling the (BSP) Governor (Eli Remolona) that he’s messaged it quite perfectly. Because he’s been messaging a potential cut for the last two or three months and the currency has behaved. If he actually does it, I don’t think the currency is going to react because everyone’s expecting (a rate cut) so this is perfect for the BSP. Well played,” Limcaoco said.
“Many of us (banks) have our loan- to- deposit ratio come up because we don’t want to chase deposits. But as the BSP brings down policy rates, maybe we’ll take a look and say maybe (it’s) time to build up deposits again,” he added.
Limcaoco said rate cuts will definitely help spur corporate borrowings for investments.
He, however, said banks will still have to make it up for the resulting compression of margins as the policy rate drops: by shifting portfolio to loans that are less sensitive to policy rates.
“… auto loans or mortgages are not as sensitive. They react much later,” he said.
Meanwhile, the BPI plans to issue Asean green bonds every quarter following the success of its recent bond sale where it raised P5 billion for the 1.5-year peso-denominated note.
Limcaoco said the high demand for the environmental social and governance-linked bonds.
“Because it’s what the customers want anyway. We can split the cost with them, so that we can get a better yield, lower cost,” he said.
