Philexim eyes 79% growth in guarantee business

MANILA, Philippines -  State-run Philippine Export-Import Credit Agency (Philexim), formerly Trade and Investment Development Corp. of the Philippines (Tidcorp), intends to grow its guarantee business by 79 percent this year as it hopes to guarantee major infrastructure and development projects under the Aquino administration’s public private partnership (PPP) scheme.

Philexim president and chief executive officer Francisco Magsajo Jr. said in a press conference that the government-owned and controlled corporation (GOCC) hopes to grow its guarantee business to P25 billion this year from about P14 billion last year.

Magsajo pointed out that the guarantee business of Philexim is currently pegged at P16 billion but several projects in tourism, renewable energy, mining, food production, bulk water, among others are already in the pipeline.

Philexim is tasked to guarantee foreign loans for development purposes as well as international and Philippine banks and financial institutions against losses from loans granted to exporters or contractors.

The guarantee given by Philexim could help mitigate creditor bank’s risk and at the same time enhances the bank’s collateral position. All guarantee obligations of Philexim carry the full faith and credit of the Republic of the Philippines and carry zero risk weight based on a circular issued by the Bangko Sentral ng Pilipinas (BSP).

Philexim, established through Executive Order 85 issued on March 18, 2002, is also mandated to provide insurance cover and other services to facilitate the export of Philippine goods and to eneter into contract for re-insurance with any recognized export credit agency or insurance organization.

“The agency’s program this year is aligned with the agenda of President Aquino on investment opportunities in basic metal production, power generation, business outsourcing, and general infrastructure spending as well as the government’s PPP program,” Magsajo stressed.

He explained that the GOCC is currently negotiating with the national government and the BSP for a capital build up program where it intends raise P5 billion in Tier 1 capital over the next five years.

For every P1 billion in additional capital, Magsajo said, Philexim could extend P25 billion worth of guarantees.

By 2014, Magsajo said the agency hopes to raise its guarantee business to about P50 billion or double than the projected level of P25 billion this year.

Philexim has a guarantee program for large accounts that cover loans to direct and indirect exporters, companies involved in the priority projects of the national government and import substitution industries and guarantees on investments.

It also has a guarantee program for small and medium sized enterprises (SMEs) covering loans of up to P20 million as well as wholesale guarantee program from SMEs that provides guarantees on existing loan portfolio of financial institutions to direct and indirect SME exporters with amounts of at least P50 million but not to exceed P200 million.

Magsajo said Philexim hopes to extend P1 billion in loans to SMEs this year of which about half or P500 million have already been released.

Despite the growth in its guarantee business, Philexim sees its earnings falling 56 percent to about P145 million this year from P332 million. The bank’s unaudited net profit jumped 128 percent last year.

“For three consecutive years, the agency continued to exhibit remarkable performance as never been achieved in previous years, which only validates the soundness of the agency’s business model,” Philexim said.

He added that the outstanding net result in the agency’s performance despite weak capital position to be benchmarked company in 2010 is proof of its corporate worth.

According to him, Philexim remitted P216 million worth of dividends to the national coffers. Prior to the record dividend remittance, Philexim has only infused P53 million to the national government.