BPI merger to improve customer service — S&P
MANILA, Philippines — Ayala-led Bank of the Philippine Islands' decision to absorb its savings arm would expectedly improve service to clients now able to transact under one room, a global debt watcher said Tuesday.
In a report, S&P Global Ratings said the upcoming merger between BPI and BPI Family Savings Bank to create "One BPI" would make it easier for the bank to serve customers by "eliminating duplication of the physical network."
This duplication has indeed hampered service on the ground. For instance, BPI Family depositors cannot deposit or withdraw money in BPI parent banks and therefore unable to use existing mobile and online apps for the same purpose. Loan payments and other transactions are also conducted distinctly within the two banks.
"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 transaction comes as the local banking sector faces a dramatic build-up of unpaid loans from pandemic-battered borrowers, which has forced banks to tighten their lending standards to shield their balance sheet.
As it is however, S&P said BPI as its client is graded "at the consolidated level" including its subsidiaries, and therefore credit profile-wise, the merger is only seen to have "minimal" impact on the lender's financial assessment. S&P currently rates BPI BBB+, an investment grade.
Generating savings was a factor for Ayala Corp.’s decision to rationalize its banking business. In the company's announcement of the merger last week, Ayala said lenders would save on reserve requirement costs by becoming one.
Under current rules, reserves account for 12% of total deposits for BPI and 3% for thrift banks like BPI Family. But the gap between the two is seen by S&P to shrink further on plans by BSP Governor Benjamin Diokno to reduce mandated reserves for universal lenders to single digit before his term ends in 2023.
Yet the gap in reserves between big and small banks, at present, remains "significant" and therefore unlikely to prompt other local lenders to consolidate their smaller units. Apart from BPI, other banks operate separate thrift lenders like Philippine Savings Bank to Metropolitan Bank and Trust Co. and China Bank Savings to Sy-led China Banking Corp.
"The 600-basis-point gap in RRR ratio is still significant for major banks to benefit from having a separate thrift bank subsidiary. Banks will likely continue to take advantage of lower regulatory costs at thrift bank subsidiaries and house riskier loans with them," the credit rating agency said.
Once completed, BPI would overtake Metrobank as the third largest bank in asset terms, and second largest in loan portfolio, next only to BDO Unibank Inc.
Shares at BPI closed down 0.3% at P82.95 apiece on Tuesday, tracking a broader bearish market. — Ian Nicolas Cigaral