Lower fees to limit banks’ loan yields

    Loans for production activities—which comprised 87.2 percent of banks’ aggregate loan portfolio, net of RRPs—expanded at a rate of 8.1 percent in November, higher than the reported growth in October at 7.5 percent.

    Online stockbroker Colfinancial.com said the Central Bank’s decision to cap credit card interest rate at 2 percent per month will squeez banks’ loan yields.

    “Note that banks are currently charging interest rate of 3.0-3.5 percent per month, depending on type of credit card of the consumer. Although credit card transactions may increase as a result of the lower rates, this likely won’t fully offset the lower yields,” Colfinancial.com said.

    “In addition, increasing the volume will also require more capital to achieve the same level of net interest income. Going forward, we think that banks may also opt to lower the credit card limit of consumers with lower credit rating in light of the lower yields,” it added.

    Colfinancial.com also said that while all banks will be negatively affected, “some banks will be more vulnerable given the larger share of credit cards in their loan portfolio.”

    In particular, EastWest Banking Corp., and Rizal Commercial Banking Corp., have credit card loans at 12.6 percent and 7.0 percent of total loan portfolio, respectively.


    The Bangko Sentral ng Pilipinas (BSP) last week said the cap was mainly due to the difficult economic environment caused by the new coronavirus disease 2019 (COVID-19) pandemic.

    Benjamin Diokno, BSP governor, said the interest rate cap on credit card receivables aims to ease the financial burden of consumers and micro, small and medium enterprises “amid a difficult economic environment caused by the COVID-19 Diokno clarified that the new issuance prescribes a separate interest rate ceiling for credit card installment loans.

    Meanwhile, Laban Konsyumer Inc. (LKI) opposed the move of banks to charge a transaction fee when doing fund transfers into GCash using the InstaPay network.


    “Most of our country is still under quarantine, lockdown and reeling from the ongoing effects of the pandemic. Many Filipinos still have no jobs and means to pay high amounts, and this additional fee of GCash will only make life harder for those affected by the pandemic. This is not the best time perhaps to impose or resume the charging of fees, on top of the normal transactions,” LKI convenor Vic Dimagiba said.

    The fees should be suspended for the rest of the pandemic, as the country is still in a state of calamity, he added.