TOAP sees 15% growth for bank’s trust funds in 2004

The country’s trust and fiduciary operations is forecast to grow by a minimum 15-percent this year with the top 10 player’s growth rate expected to play in the 20-percent level.

That was the assessment made by the Trust Operations Association of the Philippines (TOAP), the umbrella organization of the trust departments of the country’s banking system. The value of the accounts managed by the trust departments grew to approximately P700-billion last year, or 40-percent better than the P500-billion in 2002.

"We are bullish over the prospects of growth for the banking system’s trust operations," Ador A. Abrogena, TOAP president said.

Of the estimated P820-billion in assets this year, the top 10 players in the industry is expected anew to account for over 80-percent of the total. Last year, the top 10 players accounted for roughly P579-billion of the total assets under management (AUM).

The leading trust departments are attached to the following commercial and expanded commercial banks, which are the Bank of the Philippine Islands (BPI), the Metropolitan Banking and Trust Co. (Metrobank), Equitable PCI Bank, Banco de Oro Universal Bank, the Rizal Commercial Banking Corp. (RCBC), the Philippine National Bank (PNB), China Banking Corp., United Coconut Planters Bank (UCPB), the Development Bank of the Philippines (DBP), and Deutsche Bank.

"It could have been better if the $600-million Marcos account held in escrow by PNB were retained," Abrogena said.

Nonetheless, industry growth points to strong growth as new products, US dollar products, efficient operations, and the expanding client base are expected to boost trust banking operations.

In the past two years, Filipino corporate and individual investors had an insatiable appetite for dollar-based investments in the past two years. It is to the credit of banking and non-banking financial institutions that it was able to introduce dollar-based investment products which keep investments within the shores.

"Trust and fudiciary accounts, as well as mutual funds and life insurance companies, introduced foreign currency investment products which helped keep money within the country’s financial system," Abrogena, who is also the trust department head of Banco de Oro, said.

Aside from attractive dollar-based trust products, the industry continues to attract and to a certain extent compete with the basic deposit products of the parent bank. Savings deposits have been offering miserable interest rates of between 1.5- to a little over two percent.

Trust products, particularly common trust funds (CTFs), have become good investment alternatives for medium-sized investors.

Most investors are looking for professional organizations like trust departments to managed funds for better returns.

"Trust departments are composed of professional managers that make investing more convenient for people or institutions which have excess cash but are unable or incapable of managing their own wealth," the TOAP president explained. Trust departments can make better investments since the fund mangers are more flexible and the high liquidity of the funds allow them to get better returns.

Traditional trust accounts (which are customized for specific demands of the clients) are escrow, estate planning, insurance in trust, employee benefits, pre-need funds, and custodianships. CTFs is one big fund consisting of personal, corporate and institutional accounts handled a trustee bank as fund manager.