Banks urged to improve services to stay ahead

A bank teller prepares stacks of 500 peso denomination for the bank’s automated cash dispenser in this file photo. (AFP FILE)

Local banks are expected to remain healthy this year given the country’s stable financial system, a banking executive said.

But competition is expected to intensify as most banks offer similar products.

To beat the competition, a bank must provide better services, said Maximo Rey Eleccion, Cebu Bankers Club president and Bank of the Philippine Islands (BPI) relationship manager.

“There is very little difference between the banks’ products now. Banks are offering the same things. We only differ now in our brand of service that we provide to our clients – how we treat our clients and customers and nurture the relationship,” Eleccion said in a recent interview.

He said the banks will be competing for the increasing number of consumers availing of auto or housing loans because of low interest rates.

“More and more people are likely to borrow from banks. We expect 2016 to be the same (as 2015), driven by consumer loans. This generation is already capable of borrowing. We have more jobs and businesses now,” he said.

He said no foreign bank is entering Cebu anytime soon. An influx of foreign banks, however, poses little threat to the rural and other small banks in the region, he said.

Eleccion noted that the small banks tend to specialize in certain sectors and cater to specific markets.

“They will not be so affected (by competition). They can survive because they have existing clientele that are loyal to them. Example, there are banks catering to salary loans of teachers, or government employees. They are very efficient in that. Captured ilang clientele,” he added.

In its quarterly inflation report covering October to December 2015, the Bangko Sentral ng Pilipinas noted that “the banking system remained sound, as indicated by various measures of liquidity and capital adequacy.”

This, despite the external headwinds emanating from a weak global economic outlook and uncertainty surrounding the adjustment in interest rates in the US.

The central bank has maintained its key policy interest rates at 4.0 percent for the overnight borrowing or reverse repurchase (RRP) facility, 6.0 percent for the overnight lending or repurchase (RP) facility, and the accompanying rates for term RRPs, RPs, and the Special Deposit Account (SDA) facility. The reserve requirement ratios were left unchanged as well.

“Current monetary policy settings are appropriate, as inflation is projected to return gradually to a target-consistent path in 2016-2017,” the report, published on the bank’s official website, said.

Inflationary pressures are seen to remain manageable this year, with the latest forecast at 3.0 percent ± 1.0 percentage point in 2016-2017.

But the impact of the El Niño weather phenomenon on food prices and utility rates are seen to pose upside risks to the inflation outlook.

On the other hand, the continued weakness in the global economy serves as the key downside risk to inflation, the Bangko Sentral said.

The year-on-year headline inflation rose in the last quarter of last year to 1.0 percent from the quarter-ago average of 0.6 percent. This brought the full-year average inflation rate to 1.4 percent, which is still below the national government’s target range of 3.0 percent ± 1.0 percentage point for 2015.

“Inflation gained momentum in the fourth quarter of 2015 due to the seasonal demand for particular food items, the adverse impact of typhoons on food supply, as well as the recent increases in passenger fares for air and sea transport,” the central bank report said.