Banco de Oro sees mild growth in trust fund portfolio

Banco de Oro Universal Bank (BdO) is making a more cautious forecast for funds managed in 2004, despite recording an impressive growth rate of 48 percent in 2003.

After attaining a record P68-billion worth of assets under management (AUM) last year, BdO’s trust group is looking at a more conservative AUM basket of less than P80 billion this year.

Its asset managers said they are anticipating a slowdown in investments with the soon-to-be released circular by the Bangko Sentral ng Pilipinas (BSP) implementing the mark-to-market over the existing accrual system of computing earnings on trust investments.

"That is what we fear," BdO senior vice president/trust banking group Ador A. Abrogena said.

The BSP is expected to issue the circular by the middle of the year, with the record date for the implementation of the mark-to-market expected on January 2005, although it is also reported that there would also be a 14- to 16-month grace or transition period after the official publication of the ruling.

Abrogena stressed while there was no opposition on the imposition of the new system, the lack of awareness by the market, however, is expected to result in a drop in investments, or at best, a flat growth rate for 2004.

CTFs or common trust funds account for half of the trust operations of BdO while the other half are the traditional products like escrow, retirement funds or employee benefits, individual or personal funds, pre-need funds, estate planning, insurance in trust, and custodianship.

The AUMs handled by BdO ranked fourth in terms of size last year, as the entire size of trust funds managed by the entire banking system reached the P700-billion level last year. Over 80 percent of the entire fund is managed by the top 10 players, including one foreign player. The remaining 20 percent are shared by a number of smaller commercial banks and a couple of thrift banks.