New ATM technology offered to rural banks

The country's largest independent automated teller machine provider is expanding its ATM network to 200 by the end of the year or early 2010, while making it affordable for small banks to become ATM card issuers using a new technology platform.

Electronic Network Cash Tellers Inc. (Encash), which currently has 126 ATMs deployed mostly in areas not attractive to regular banks, has also diversified its services by offering a new core banking solution called Savant.

The solution is a web-based suite of applications designed to provide rural banks a real, centralized, multibranch, online system with account balance updates performed in real time.

“Savant is getting good reaction. The application really fits the requirement of the rural banks,” Encash president Eric Severino said in an interview.

“We think of it as a vehicle where it would add more ATM transactions to our ATM business because it now allow rural banks to issue ATM cards and use this in our network as well as in other networks,” Encash director Mike Mapa added.

Four of the country’s leading rural banks have already signed up for this banking solution—GM Bank of Nueva Ecija, Bank of Florida of Pampanga, Bangko Kabayan of Batangas and 1st Valley Bank of Lanao del Norte.

Mobile microfinance bank gears up

LOW-INCOME households may soon avail of loans with the aid of their mobile phones, with the mobile microfinance bank of the Bank of the Philippine Islands (BPI) and Globe Telecom, Inc. about to commence operations.

BPI President and Chief Executive Officer Aurelio R. Montinola III said the joint venture of the two Ayala firms had obtained central bank approval earlier this month, which will allow it to start operations in a month or two.

"We are going to have our first board meeting [this week or the next]. We will have our operating systems — loans and deposit-taking — [in place] within the next month or two," Mr. Montinola told reporters late last week.

The joint venture will use the banking license of Pilipinas Savings Bank, Inc., a BPI subsidiary, as vehicle for extending microfinance loans.

BPI, the country’s third largest bank, would transfer its microfinance business — it extended wholesale loans to microfinance institutions — to the mobile bank. It used to lend P500-P600 million annually to these institutions.

Globe, the country’s second largest telecommunication firm, is no stranger to the microfinance business either. It has been facilitating money transfers between rural banks and their clients using its G-Cash platform.

The mobile microfinance bank would use G-Cash’s network of over 3,000 outlets and initially extend wholesale loans to microfinance institutions.

Mr. Montinola said the mobile bank would start servicing retail customers next year.

"We will use the rest of the year to put things together. It’s really next year when we are going to concentrate on doing more things," Mr. Montinola said.

He added that aside from giving retail microfinance loans, the mobile bank would also offer deposit services to clients.

Details on how the retail microfinance loans will be distributed through mobile phone technology are still being ironed out, Mr. Montinola said.

"The bank knows certain things, and people from Globe are experts on technology. You put the two together and there are a lot of possibilities. We are hoping the synergy will be positive," he said.

The joint venture was hatched after Globe and parent firm Ayala Corp. bought stakes in Pilipinas Savings Bank from BPI.

BPI and Globe now each have a 40% stake in the thrift bank while Ayala Corp. has 20%.

Based on central bank data, Pilipinas Savings Bank, with a lone office in Greenhills, San Juan, has assets totaling P367.84 billion as of the first quarter.

The mobile bank will have a capitalization of P400 million.

The mobile microfinance bank will have Gerardo C. Ablaza, Jr., former Globe president, as chairman and Teresita B. Tan, currently senior vice-president and head of BPI overseas banking and channels services group, as president.

BPI’s move is consistent with those of other universal and commercial banks that are venturing into microfinance.

Yuchengco-led Rizal Commercial Banking Corp. (RCBC) bought Batangas-based JP Laurel Rural Bank in February, while mid-sized commercial bank Asia United Bank is acquiring the Rural Bank of Angeles to gain a foothold on the retail microfinance business, which has been very lucrative for rural banks.

In microfinance, loans not higher than P150,000 can be extended with relatively higher interest rates. Repayment can be done on a daily, weekly, bimonthly or monthly basis, making the turnaround of funds faster compared to providing consumer or corporate loans.

BPI’s mobile microfinance bank will also complement Globe’s business, said Rizza Maniego-Eala, president of G-Xchange, Inc. (GXI), Globe ’s wholly owned subsidiary running the G-Cash platform.

"GXI is the vehicle for providing financial services but there are some things we cannot do. That’s why we decided to invest in the bank," she said.

Allied Bank-PNB merger to come about in 6 to 9 months, says exec

LUCIO Tan-controlled Philippine National Bank (PNB) and Allied Banking Corp. may be able to fully merge their operations within the next six to nine months, according to PNB president and chief executive officer Omar Byron Mier.

The merger was supposed to have been completed by the middle of this year but was delayed because of the need to comply with US banking regulations requiring Allied Bank to divest its 28-percent equity share in California-based Oceanic Bank prior to merger.

In an interview with reporters on Friday night, Mier said two investment banks—which he declined to identify—were recently hired to speed up the sale of the shares in Oceanic.

“[The investment banks] are talking to prospective investors and there’s interest coming from some funds in South America, Europe and the US,” he said. “So the merger will happen in the next six to nine months.”

PNB, the surviving entity in the merger, is hoping to become the fourth-largest domestic bank in terms of assets, deposits and loans after swallowing Allied Bank. As of end-March, it was No. 5—behind Banco de Oro Unibank, Metropolitan Bank & Trust Co., Bank of the Philippine Islands and state-owned Land Bank of the Philippines—in assets.

The two banks had a combined asset base of P456 billion as of end-March, bigger than fourth placer LandBank’s’ P427 billion.

PNB ranked sixth-biggest in deposits and was No. 9 in net loans and receivables as of end-March.

The merger was originally expected to be completed by the end of 2008 but had to be pushed back because of the regulatory issue.

Allied Bank initially thought it would need not more than six months to complete the sale of its shares in the $30-million US bank. But selling at a premium in a recessionary environment proved to be difficult.

“That’s the only thing holding back the legal merger of Allied Bank and PNB,” Mier said. “We will not sell at a loss. Definitely we have to sell at a premium and there is interest because [Oceanic] is a profitable bank.”

Despite the merger delay, the two banks have started synchronizing their information-technology systems and aligning products, policies and procedures.

They are also preparing to expand into China. On Friday the two banks separately disclosed to the stock exchange the approval of the China Banking Regulatory Commission on the equity investment they were to make in Allied Commercial Bank (ACB) based in Xiamen.

Mier said PNB and Allied Bank will invest $88 million in ACB to jump-start the expansion in China. PNB will have a 41-percent stake in ACB and Allied will have 50 percent, while certain individuals will own the remaining 9 percent, he said.

In their disclosures on Friday, PNB said it would invest 394.1 million yuan in ACB while Allied Bank said it would put in an additional 153.98 million yuan and convert its share of 42.9 million yuan in undivided profits in ACB into equity.

Mier, however, said the expansion in China will only begin when ACB, which has a branch in Chonquing, meets the minimum required net worth of 1 billion yuan.