China Bank sees 2011 as challenging year for Phl banks

MANILA, Philippines - China Banking Corp. (China Bank) sees 2011 as a challenging year for Philippine banks after an outstanding 2010, which saw the industry register double-digit growth in earnings.

China Bank is majority controlled by the SM Group of Companies.

Last year, the country’s banking industry recorded combined net earnings of P91 billion, up 31 percent from 2009.

“The general sentiment is that it will not be as good as 2010, where the industry saw positive mark-to-market earnings,” said Ricardo R. Chua, executive vice president and chief operating officer of China Bank.

The bank official said that since 2010 results topped banks’ expectation, 2011 would be a challenging year given the market uncertainties brought about by issues on sovereign risk in Europe, US budget deficit and the tensions in the Middle East.

Chua, meanwhile, explained that China Bank and most of the commercial banks reported huge trading gains, which beefed up its interest income.

However, initial reports of first quarter earnings so far indicate that the trading gains have fallen, as the equities market has been moving sideways and interest rates remain depressed.

Total assets, which included investments in securities reached P6.90 trillion in 2010, up 12 percent from P6.19 trillion in 2009.

To deal with a “weaker” investment climate in trading of securities, China Bank will have to beef up its lending activities. “We will have to expand our loan portfolio, expand our network and client base, and make our portfolios more attractive,” Chua said, adding that bank’s will be fighting to contest every piece of real estate in the consumer market.

The bank executive said that they were in a position to make any acquisition this year, whether it be a relatively good-sized commercial bank or smaller commercial or thrift banks.

He added that China Bank won’t tap the debt market for acquisition funds, since it is extremely liquid from self-generated earnings.