BPI joins fray to capture remittance from Pinoys in Eur


MAKATI CITY–BEFORE sliding to third position in the Philippine banking industry, Ayala family-led Bank of the Philippine Islands set its eyes on the profitable remittance market that Philippine National Bank previously dominated.

But with its shareholder hobbled by regulations in the United States, where bulk of remittances from some eight million overseas Filipinos go through, BPI settled for the United Kingdom.

This was what BPI president Aurelio R. Montinola III told stockholders during their annual meeting last March.

“Why London, when you can target the United States where there are more overseas Filipino workers?” a shareholder echoed what would be expected questions from the banking industry.

“Certainly, we would like to have a branch in the US, but regulatory agencies would not allow us because of our partner, DBS, is not fully engaged in bank operations,” Montinola replied.

Singapore’s DBS Group, Southeast Asia’s biggest bank, owns 20 percent of BPI. The rest of the shares are owned by Philippine conglomerate Ayala Corp., which also has assets and investments in real estate and water utility.

At the BPI stockholders’ meeting, executives revealed that the move to put up a branch in London, one of the world’s financial centers, has been on the pipeline ever since the bank made inroads in the European remittance market.

According to its plans, BPI will shell out £20 million (or about P1.9 billion) to have a full service branch in London to beef up its remittance center currently based in Italy.

Montinola said in March BPI expects to establish a UK-registered corporation in about six months, although the Financial Services Authority of London has already given BPI its British license to operate a bank last April 26.

“We are in the stage of finalizing our systems now. We are in one location and we need a second location [for technical purposes]. We expect that we would be in the pre-operation stage by about September or October this year and then, for next year, a full operation,” he told reporters after the stockholders’ meeting.

“The whole point is to grow from remittance transactions to overseas banking relationships,” he added.

Inched out

BPI’S ANNOUNCEMENT was made at a time when it would slide to third from its current position as the country’s second largest financial institution, having a P473.24-billion net asset.

The slide would occur anytime in the next few weeks as regulators gave the green light for the merger of Equitable-PCI Bank Inc. and Banco de Oro Universal Bank, currently ranked fourth and fifth largest in the country, respectively.

The two banks, which will carry the name Banco de Oro-EPCI Inc., will have a combined net asset of P607.87 billion, according to its published statement of condition as of December 29, 2006.

The merged entities would dislodge Metropolitan Bank and Trust Co. (Metrobank) from its top position, having a net asset of P536.61 billion.

But when BPI starts its London operations, it would be competing head on not with these two banks but with PNB, now majority-owned by tobacco tycoon Lucio Tan.

PNB has been operating a branch in London since 1976. This was later renamed to PNB Europe PLC, which also has a full banking license. Other than handling remittances, PNB’s subsidiary is engaged in export-import financing and corporate and consumer lending.

PNB has 64 remittance centers, including 39 in 11 US states, nine in HK and eight in Canada. It also has 30 bank branches in several countries, with concentration of operations in the US and Canada.

BPI, however, already showed signs it means business, especially in capturing gains from the US$8-billion average annual remittance, when it dislodged PNB in 2005 from the latter’s top position in the global money-sending market.

PNB, the country’s sixth largest bank, lost the initiative last year to BPI when it captured only US$2.2 billion or about 20 percent of the remittance market compared to BPI’s claim of having managed US$3.2 billion (about 22 to 23 percent market share) in money flow.

BPI has been expanding its business aside from the overseas Filipino market, knowing that many of them are already sharing a market that can shrink and grow anytime.

Last year, it opened its Rome-Vittorio Emanuel office, its fourth remittance center in Italy, in order to handle the remittance transactions of Chinese nationals in that country.

“This office raised Italy’s remittance performance by almost 300 percent from the previous year,” BPI claimed in its 2006 annual report without citing specific figures.


THE Philippines is the world third largest recipient of remittances, after India and Mexico. Last year, $12.3 billion were sent to the country, or about 10 percent of the gross domestic product.

BPI said it would mainly target the OFWs in the UK, which last year remitted $561.67 million, or about a third of the entire remittances from land-based Filipino workers for Europe, according to data from the Bangko Sentral ng Pilipinas.

Stock estimates data from the government Commission on Filipinos Overseas for 2005 cites that the UK is home to some 52,977 immigrants from the Philippines.

CFO also estimates there are 72,638 temporary contract workers and 7,480 undocumented migrants for a total of 133,095 Filipinos in that European country. That same year’s estimates showed there are 211,351 immigrants, 523,442 contract workers and 123,282 undocumented migrants, or a total of 858,075 Filipinos in Europe.

Operating in that continent, even with remittance alone, could be profitable for a bank.

For instance, Rizal Commercial Banking Corp.’s Rome, Italy-based remittance center RCBC Telemoney Europe SpA. reported a net income of €162,300 (or about P10.47 million or US$220,589) from operations in three major cities.

With a full-service branch, BPI could also offer its other products even before a Filipino leaves for work in Europe.

According to Montinola, they could also offer OFWs other products like a housing loan or the unit investment trust fund aside from a savings account.

“We usually don’t make comments on what we think will happen because numbers are just numbers. We will try to expand first our share and our reach,” he said.

“More or less, say, in the first three years of operation, we would sort of navigate our way in figuring how things would turn out,” he said.

He, however, added that the ultimate plan was to have its other branches at the rest of Europe but “probably that will be between 2008 and 2009.”

Catch up

TECHNICALLY, BPI is playing catch-up with its competitors which have established footholds in other countries since the sixties.

For instance, in August 1963, Equitable Banking Corp., the firm that bought and merged with Philippine Commercial International Bank in 1999, established its full service branch in Hong Kong. It was the first bank in the country to have foreign operations to cater mostly to Filipino-Chinese businessmen.

Currently, EPCIB has 27 remittance centers and a network of 300 correspondent banks, mostly in the US.

It took BPI more than a decade in 1974 to establish its own branch in Hong Kong to tap the same customers that Equitable and other Philippine banks had already mapped out over those years.

In the US market, for one, BPI only has a remittance center while Metrobank, Philippine National Bank, and even Allied Banking Corp., through a stake in a US bank, have already established full branches there since the eighties.

Reviewing Metrobank’s financial statement for 2006 reveals that the contribution of its US operations to its total revenues only accounts for a mere 1.28 percent. But this performance contributes 2.7 percent to the bank’s bottomline.

The bank’s audited net income reached P5.53 billion for the year, or 46-percent higher than the previous P3.8 billion.

For the European market, there were already eight local banks with presence in London, according to the BSP website.

However, only two have full-service branches: Allied Commercial Bank UK Plc (public limited company) and sister-firm PNB.

Montinola said they expect a 15-percent increase in remittances would be coursed through this formal channel of banks.

“The difficulty with all of these projections is not really within our control. People who go abroad… would have to decide if they send money to the Philippines or not,” he added.

Montinola said he’s banking on BPI’s “superior system… to get a larger proportion of what they [overseas Filipinos] send.”

While Montinola aired his fears that Filipino deployment could slow down in the next few years due to the Philippines’s booming call center industry, he said BPI still believes this could be still far.

“Over the years, redeployment and migration are seen to be a preferred option for Filipino workers and professionals as long as the domestic economy can not provide meaningful employment,” the bank said in its annual report.