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15:00.0
This is the Philippines.
15:30.0
Welcome to the Business Outlook. I'm Ron Cruz.
15:33.3
And I'm Salve Duplito.
15:35.6
U.S. futures are up while European markets are mixed as tensions in the Middle East roil sentiment.
15:41.7
Abra mining officials and agents lapped with half a billion peso in fines for fraudulent trading.
15:47.1
And a discussion on the state of digital banks in the country with Philippine Central Bank Director Melchor Labasan.
15:57.8
Let's check on European markets first.
16:00.1
They are mostly in the green as investors shake off worries over the escalating tension in the Middle East
16:05.4
after Iran launched an attack on Israel Sunday.
16:08.7
The German DAX and the French CAC 40 are up a percent each with industrial stocks leading gains.
16:14.5
As for Wall Street, futures are also pointing to a positive open
16:18.2
with a major indices seen to rebound after a heavy sell-off last week.
16:22.8
Goldman Sachs also boasting sentiment after it reported its profit jumped 28% in the first quarter,
16:28.7
boosted by its investment banking unit.
16:35.1
Here are other stocks to watch out for.
16:37.8
We're monitoring shares of banking software company Temenos
16:40.5
after an independent probe into allegations made by Hindenburg Research
16:44.5
were found to be inaccurate and misleading.
16:47.6
The short seller had accused Temenos of using aggressive accounting tactics to boost its share price.
16:54.0
Shares of the Geneva-based firm surged 21% on the news.
16:59.4
shares of Apple after a drop in iPhone shipments
17:02.3
allowed rival Samsung to reclaim the top phone maker spot.
17:06.6
Apple shares fell 1% in pre-market trading.
17:09.8
And we're also keeping a close watch on shares of Tesla
17:12.4
after a report said the EV maker will lay off more than 10% of its workforce,
17:17.6
citing an internal memo.
17:19.6
Tesla shares are down 7 tenths of a percent before the bell.
17:25.3
Asian markets kicked off the week on a back foot
17:27.7
amid the geopolitics.
17:28.7
A new report shows that China has formed a significant political tension to the Middle East.
17:32.3
Japan's CK225 sheds 7 tenths of a percent while Australia's ASX200 fell half a percent.
17:37.3
But the Shanghai Composite bucked the downswing after China's central bank kept its policy rates unchanged as expected.
17:44.8
Here at home, Philippine shares extended their slump to an eighth straight session.
17:49.8
The main index now at the 6500 level after tumbling 1.5 percent Monday.
17:55.6
The market is scared.
17:57.3
The market is scared.
17:57.8
The market is currently in a corrective phase. 6% down, just 6% down though from the 7,000 level.
18:07.2
However, with the backdrop of sticky inflation that we saw in the last 2 to 3 months
18:12.9
and currently increasing global oil prices due to the renewed conflict in the Middle East
18:20.4
and more importantly, the next Fed meeting where it may possibly start to shift its policy
18:27.5
is at least 2 months away.
18:31.1
So there's really no positive catalyst in sight as we stand today.
18:39.0
So I would expect in the meantime for market participants to once again remain cautious and remain on the sidelines.
18:49.1
President Ferdinand Marcos Jr. says he sees no reason for China to fabricate the alleged secret agreement
18:55.9
between former President Romero,
18:57.5
Rodrigo Duterte and Chinese President Xi Jinping on the West Philippine Sea.
19:02.3
Marcos told reporters Beijing's insistence about the deal has convinced him of its existence.
19:07.6
But the chief executive noted former Duterte officials have presented conflicting statements on the supposed agreement.
19:16.6
Why is there not one single document that contains that agreement?
19:22.2
Why is there not one shred of evidence that can show that this agreement exists?
19:27.5
Why when we did the transition period between the previous administration to this administration did no one mention a secret agreement?
19:38.3
Why was it kept secret?
19:43.1
These are very simple questions but I'm finding a great deal of difficulty finding answers for them.
19:53.7
Marcos also insisted Manila's recent trilateral agreement,
19:57.5
which is the first in the world, is not a secret.
19:57.5
Marcos also insisted Manila's recent trilateral agreement, which is the first in the world, is not a secret.
19:57.5
The agreement with Japan and the U.S. is not directed at anybody.
20:01.1
He said a great part of the deal are the economic operations being fostered by the three countries.
20:08.9
We have to maintain commerce, we have to maintain the peace, we have to maintain stability.
20:15.1
And that's what really the point of the trilateral agreement is.
20:18.7
It's so that we provide for ourselves in the region, in the Indo-Pacific region,
20:23.1
an area of peace and stability so that we can all,
20:27.2
we can all find our way in this new global economy, post-pandemic economy.
20:34.7
The Philippines sees lower public sector foreign borrowings in the first quarter of 2024.
20:40.7
The Philippine Central Bank says it approved some $2.87 billion in foreign borrowings.
20:46.0
That's 48% lower than last year's.
20:49.3
The Philippine Central Bank reiterates it promotes the judicious use of resources
20:53.5
and ensures that external debt requirements are at management.
20:57.2
It adds a Q1 borrowings will fund the national government's infrastructure projects
21:02.7
and programs on healthcare, digital transformation, tax administration, and financial inclusion.
21:09.7
The country's total outstanding debt breached 15 trillion pesos in February this year.
21:16.4
Here are some local corporate headlines.
21:18.8
Abra Mining, its officer's transfer agent, and some stockholders slapped with a total of 560 million pesos in fines.
21:27.2
For the unauthorized and fraudulent trading of unissued and unlisted shares from 2015 to 2019.
21:34.4
The case stems from discrepancies in Abra Mining shares lodged with the Philippine Depository and Trust Corporation,
21:41.8
which were in excess of the number of listed, registered, issued, and subscribed shares
21:46.7
submitted in the company's filings with the Securities and Exchange Commission.
21:51.3
On to the latest earnings now.
21:53.4
Andrew Tan's Emperador posts an 11% drop.
21:57.2
In full year 2023 profit, it cites higher interest expense and tax.
22:02.4
Revenue, though, rose 4.6% thanks to the strong performance of its whiskey segment.
22:08.6
As for the SSI Group, which is behind big retail brands like Lacoste, Cartier, and Loueve,
22:14.7
it saw record high earnings for 2023 with net income hitting 2.6 billion pesos,
22:21.5
higher by 34% year-on-year as sales dropped 17%.
22:27.2
Meanwhile, Shakey's Pizza Asia Venture reports 2023 net income breached the 1 billion peso mark
22:33.7
despite high inflation and high interest rates.
22:37.0
This as system-wide sales surged 32% to 18.6 billion pesos,
22:42.4
supported by same-store sales growth and network expansion.
22:46.6
And finally, PT&T returns to profitability after its net income last year reversed 10 billion pesos in capital deficiency.
22:54.0
The company put the growth in net income at 143%.
22:57.2
PT&T also confirms it's eyeing to resume trading at the Philippine Stock Exchange after a two-decade hiatus.
23:09.6
We're taking a quick break.
23:11.2
Up next, we speak with BSP Director Melchor Plabasan on the state of digital banks in the country.
23:27.2
I can't feed 5,000, but I can feed one.
23:32.3
I can't walk on water, but I can walk in the shoes of another.
23:38.4
Sharing what I have in my hands is the miracle that needs to be seen today.
23:45.0
This is what I can share.
23:46.8
This is my Alai Kapwa.
23:49.4
Alai Kapwa, a flagship program of Caritas Philippines by the Catholic Bishops Conference of the Philippines.
23:57.2
We are always looking at the interests of consumers, especially the low-end.
24:05.1
My greatest fear is one day they stop brushing their teeth because they cannot afford toothpaste.
24:09.9
Then we have a problem.
24:11.8
They can still afford because we bring down the container of toothpaste from the regular tubes,
24:17.5
which is 30-40% cheaper than tubes.
24:20.6
So this is the way to move forward.
24:22.1
We consider how do we bring quality products affordable,
24:27.2
at affordable prices to the low-end.
24:57.2
What do you think Congress failed to do at that time
25:09.8
in order for the country to avoid having a broken transport system?
25:14.2
With what is happening on the ground,
25:15.7
with what is happening in the West Philippine Sea,
25:17.8
our fishing and being driven away from their traditional fishing grounds,
25:21.0
this doesn't add up.
25:22.1
How is this affecting the morale of the force?
25:25.0
Tell us, what is it?
25:27.3
The system there that really allows this impunity to exist.
25:32.8
Is the Philippine government entirely powerless in this situation?
25:36.3
Your no-nonsense, no-time news fix on ASC.
25:40.3
Dateline Philippines with Carmina Constantino.
25:43.6
Weekdays at 12 noon, only on ASC.
26:08.0
In March 2024, the Philippine Central Bank reported
26:10.9
over 8 million deposit accounts already signed up with digital banks.
26:14.7
But it also noted only two out of the country's six digital banks
26:18.9
have been profitable so far.
26:22.2
To tell us more about the Central Bank's outlook on digital banking,
26:25.8
we have BSP Director Mel Vazquez,
26:27.2
who will be joining us in the studio finally.
26:30.3
After, I think, one year of asking him for interview,
26:34.2
finally he's here.
26:35.2
It's been a really long time.
26:37.4
He's been very busy because of all of the things that's happening in your department.
26:42.8
Before I ask all of the questions that we want to talk about the digital banking industry,
26:47.9
I don't think a lot of people understand exactly your department.
26:51.3
Tell us what you do in the TRIST.
26:53.0
It's the Technology Risk and Innovation Supervision Department.
26:57.2
Especially with all the AI stuff going on, hacking,
27:00.0
so that people understand what you're really doing.
27:02.3
So basically, I head the department in the Banco Central,
27:05.1
which is responsible, let's say, for cyber security,
27:10.4
fintech innovation, you mentioned about AI, about machine learning,
27:15.7
and of course, the end-to-end supervision of digital banks.
27:20.7
I understand now.
27:22.1
No private life. It's all work.
27:24.8
So Mel, let's talk.
27:27.2
About digital banking, there are a lot of things that we want to ask you,
27:29.7
but talking about digital banks, because the central bank governor just issued a statement
27:33.7
that sort of created a lot of questions in the industry.
27:38.7
Three years of banking operations, the six digital banks are still not profitable.
27:44.6
And I think one of the factors identified is that this is still an untested market.
27:51.5
Is this the way it's been in other countries?
27:56.2
While this is not the...
27:57.2
This is not the most ideal scenario, but what's happening in the Philippines
28:00.8
in terms of the performance of digital bank is somewhat consistent with what's happening around the globe.
28:09.2
So in fact, there was a study undertaken last year suggesting that only 20 of the 453 digital banks globally are profitable.
28:20.2
So we're better off than, let's say, Europe or America.
28:24.9
Eleven of those 20 are in the Asia Pacific.
28:29.1
So what's the greatest challenge?
28:30.8
What have been the hindrances from it being expanding and profitable?
28:36.5
The main challenge really is that the banks are somewhat slow in terms of lending.
28:45.4
Because, you know, when you offer deposit, it's very easy to generate deposit, right?
28:52.6
You just offer high interest.
28:54.4
Which is what they've been doing.
28:55.7
But how to productively...
28:57.2
How to productively use those funds that you obtained from deposit activity.
29:01.1
That's the main challenge.
29:02.5
Which is basically the job of banks, right?
29:05.2
You get deposits, you lend.
29:06.6
You don't earn from deposit taking, right?
29:09.2
You earn from lending.
29:11.0
So they're a bit cautious because they're doing it differently.
29:15.9
It's not the usual getting the pay slip or getting the balance sheet income statement.
29:22.6
It's using alternative data.
29:24.9
Payment behavior, etc.
29:29.3
And normally, it would take around 12 to 18 months before you're able to identify the right credit scoring model.
29:40.3
I started reporting on this around five years ago.
29:43.4
I'm not sure anymore about the alternative data.
29:46.1
And at that time, I think it was said that this should be more reliable even than the documents you send in the traditional banks.
29:57.2
The documents are just one part of their lives.
30:00.3
But the alternative data actually shows behavior that's taken from your phone, your...
30:05.3
So what's the problem?
30:07.1
But the credit scoring model needs to be trained, right?
30:10.8
So you need to have...
30:13.3
Again, I mentioned about one year or one and a half years worth of data for you to be able to train the credit scoring model, really.
30:21.2
And identify the...
30:23.5
Or making it accurate in terms of predicting...
30:27.2
Credit worthiness of clients.
30:29.2
That's why they're cautious.
30:30.4
That's why they're cautious.
30:31.9
Aside from maybe profitability, are there any other factors that the BSP is looking at to measure the effectiveness of digital banks?
30:40.0
Because if we're looking at the six digital banks that we have, do you think it could also be a trust and knowledge issue about the names behind the brands?
30:54.3
For the existing digital banks...
30:57.2
For the existing digital banks, we have Union Digital, which is backed by Union Bank, of course.
31:03.7
And overseas Filipino-powered by Land Bank.
31:06.1
All the others are relatively, fairly new names in the country.
31:12.4
Do you think this is a factor that Filipinos are looking for names that they can trust and then not new ones?
31:18.5
I think right now there's no indication that it's...
31:23.8
Because the performance is somewhat consistent.
31:27.2
Across all the six players.
31:30.0
So it's really more of probably familiarity with the service, right?
31:37.7
All of the speculation because the governor said two banks are profitable and the others are not.
31:44.9
Yeah, two out of six.
31:45.8
So people are asking, who are those two?
31:47.9
It's 30% compared to the global average, which is just 4%.
31:56.1
Does the central bank...
31:57.2
Does the central bank see this as a threat moving forward?
31:59.8
Or is it more still of a...
32:02.0
You know, there's still an opportunity here because as you said, we're better off even than other countries.
32:08.1
Right now, we do not consider it as a threat right now.
32:12.2
It's not a concern right now because as you...
32:14.6
I'm sure you are familiar with how the typical business operates.
32:19.5
It's not only the business of banking.
32:21.8
Normally, it really takes time before you become profitable, right?
32:27.2
So in the case, I mentioned about the five to seven years, right?
32:32.1
And normally, you would spend a lot in terms of operating expenses, in terms of establishing the core operations, contact center, hiring people, and while your products and services are picking up.
32:45.3
So I think we don't see it as a concern right now or a threat.
32:50.9
So these are just like growing pains for the sector since it's still relatively young.
32:57.0
But our concern right now is to ensure that they implement appropriate strategies so that they are able to meet their business objectives, become viable, and at the same time, remain financially sound despite incurring continuous losses.
33:13.4
That's our main concern.
33:14.8
Do you see Filipinos trusting digital banks already?
33:18.5
I mean, of course, we've seen the numbers.
33:21.6
Some of the banks are showing massive increases in deposit-taking.
33:25.9
So that means people are...
33:26.9
You're trusting them because you're giving them their deposit.
33:29.5
But there's a huge space for more growth.
33:34.1
So does this mean, you know, are Filipinos more still iffy?
33:38.4
Should I trust this app?
33:39.7
Or are they just trying this out?
33:41.1
There's no branch at all, right?
33:43.5
So based on what we have observed, I think we have seen a lot of positive development.
33:51.5
You mentioned about 8.7 million accounts opened by digital banks.
33:56.9
So that already represents about 7% of the Philippine banking system.
34:02.4
And it's steadily increasing based on the rate of increase right now.
34:07.6
So I think Filipinos are...
34:11.2
We have seen changing or shifting preference towards convenient, towards user-friendly, innovative products and services.
34:22.6
Gosh, with the traffic.
34:29.2
I won't queue for paying my bills.
34:33.3
So what's needed in the sector for it to be profitable and develop and improve?
34:42.0
As earlier mentioned, Ron, deposit is not an issue.
34:46.7
You can generate deposits as long as you're able to give competitive deposit rates.
34:53.4
The main challenge really is what...
34:56.0
We have been implying is that they should be able to prudently establish and grow their lending business.
35:06.8
Again, as I mentioned, you can't be profitable by paying interest, right?
35:10.5
You have to lend for you to become profitable.
35:13.0
And at the same time, identify other steady sources of revenue like fees, etc.
35:18.9
And is that going to be just left to the digital banks to handle on their own?
35:23.2
Or is the BSP going to...
35:24.6
Is the BSP going to somehow help the sector?
35:28.0
Yeah, I think the biggest contribution of BSP on that aspect is really creating an environment.
35:35.9
I mean, so that they are able to grow their business.
35:43.8
You know, I still get this question a lot.
35:46.4
Are digital banks safe, Ms. Salve?
35:49.6
And as somebody who tries to make that happen, I'm sure you're tough on the regulatory.
35:54.6
Aspect, how do you answer that?
35:58.6
What does the central bank do, for example, to make sure that all of these banks are safe?
36:03.8
Because, you know, there's only one way to transact and that's online.
36:09.3
Online, it's a wild, wild west when it comes to hacking, other security problems.
36:14.8
So my answer to your question, most definitely, they are, I mean, they are still safe.
36:20.5
Because when you speak about safety, it's not just about financial soundness.
36:25.1
I mentioned about the importance of meeting these financial indicators, etc.
36:29.0
But safety is also about effectively managing your risk.
36:33.1
And when we say risk in digital bank, it's credit, operational, and cyber.
36:37.9
That's why we're closely monitoring those aspects.
36:41.2
And at the same time, again, being the wife of a CISO, right?
36:46.3
So you're familiar with the tools that the BSP used in terms of supervision tools.
36:51.2
In particular, we have on-site examination.
36:53.5
We go directly to that.
36:54.7
The bank, we have up-site surveillance.
36:57.8
We have licensing process.
36:59.4
And we use these tools to ensure that the operations of these digital banks remain safe and sound.
37:08.2
I hear that you're a very tough regulator.
37:14.3
But what would you want to see more from digital banks when it comes to making sure that they're safe?
37:23.6
Making sure that...
37:24.4
That they effectively manage their risk.
37:26.4
Because right now, while they are subject to the same rules and regulation,
37:32.3
but probably what we have observed is escalated risk when it comes to cyber, when it comes to AML.
37:38.5
So they need to be able to manage those risks.
37:41.4
Because of the technology-centric nature of their operations.
37:48.1
Well, I have one last question, if that's okay.
37:51.7
All six banks have the mandate to...
37:54.4
To really reach the unreachable, right?
37:57.0
That's why I think financial inclusion is one of the main reasons why the central bank gave six new licenses for digital banking.
38:04.9
Based on the numbers, are these the people that they're actually reaching right now?
38:10.3
The answer to that is the challenge right now, given all the structural constraints right now,
38:17.4
is that we're just developing our tools in terms of really figuring out the profile of the digital...
38:24.4
of the clients being catered to by digital banks.
38:28.8
But as I mentioned earlier, we're happy with the 8.7 million accounts opened by digital banks.
38:36.3
And we are seeing steady increase.
38:38.5
We'll ask this again from you next year.
38:41.1
Thank you so much.
38:42.1
And we will issue a digital... an industry report probably.
38:45.8
We'll send a white paper version to you.
38:48.8
Thank you so much, Mel.
38:50.3
It's been a pleasure to talk to you.
38:53.5
That's it, Mrs. Anthony.
38:54.4
Look around, crew.
38:55.2
And I'm Salve Duplito.
38:56.5
The world tonight comes your way at the top of the next hour.
38:59.3
Keep it here on AMC.
39:24.4
We'll be right back.
39:54.4
We'll be right back.
