Banco de Oro trust funds up

The trust operations of Banco de Oro Universal Bank (BdO) has not only recovered from the quality shift from common trust funds (CTF) to the unit investment trust fund (UITF).

It had in fact grown to P91.5 billion end September this year from the P88 billion at the start of the year.

"The market is hungry for investments, and they are taking to the UITF quite well," Ador A. Abrogena, BdO senior vice president said.

The Bangko Sentral ng Pilipinas (BSP) ruled that all accrual-type CTFs would shift to the marked-to-market (M2M) valuation process of the UITF as the country slowly adopts to international accounting and valuation standards.

The country’s banking system has already stopped sellling CTFs and introduced UITFs this year. However, it has not been easy for the trust departments of the banks, and BdO was no exception.

By the end of the first three months into 2005, its assets under management (AUMs) dropped to P84 billion from P88 billion end December 2004.

The major reasons for the drop in volume was the anxious market towards the quality shift, the maturity of custodian accounts, and the natural CTF attrition and maturities.

At practically the same time, BdO already applied for six UITFs with the BSP which was approved. However, management decided to educate the bank personnel as well as the investing public of the new products before these were aggressively marketed.

So while the AUMs dropped to P79 billion by the middle of the year, BdO launched its six UITFs fully prepared.

"We wanted all the UITFs to have a track record before we sold it," Abrogena said.

The new UITFs are a peso and US dollar money market funds, fixed income funds, balanced fund, and a peso and US dollar bond fund.

By end September, the AUM ballooned to a record level P91.5 billion. Roughly P35 billion are still maturing CTFs, another P15 billion UITFs, and approximately P40 billion traditional accounts.

Last year, the trust operations of BdO was ranked fourth largest behind traditional leaders Bank of the Philippine Islands (BPI), the Metropolitan Bank and Trust Co. (Metrobank), and the Equitable PCI Bank.

The total volume of UITFs reached P26.38 billion end July 2005, more than half of which are investments in US dollar-denominated instruments.

In 2004, the top 12 trust operations of commercial banks last year reached a record P707.5 billion worth of AUMs, or nearly 30 percent better than the P544.3 billion in 2003.