One Network Rural Bank loans, deposits up in first half

DAVO CITY , Philippines   — The loan and deposit portfolios of the One Network Rural Bank (ONB) has both grown by double digits in the first semester of 2009, while its loan intermediation ratio stood at a high 102 percent.

Mindanao’s largest rural bank however reported a slightly lower net income of P131 million, or 17 percent lower than the P157 million in the first six months of 2008.

ONB president Alex V. Buenaventura said that the main reason for the lower earnings level this year was due to the lower interest rate ceiling of 12 percent add-on rate imposed by the Department of Education (DepEd) on the Automatic Payroll Deduction System (APDS) salary loans to teachers.

“This lower yield covers a big volume of P2.5 billion at the end of the first semester of 2009,” Buenaventura said during its annual stockholders meeting over the weekend.

But its first semester earnings was equivalent to 26 percent annualized return on private equity or 3.1 percent annualized return on assets

Loan portfolio increased by 14 percent from P5.3 billion in the first half of 2008 to P6 billion this year.

Main drivers to the strong loan growth was the salary loans to teachers, the One Banana program loans to cavendish banana small farmer growers, and the One Business loans to micro and small entrepreneurs.

Deposit liabilities expanded by 11 percent from P5.3 billion in the first semester of 2008 to P5.9 billion in the same period this year.

Buenaventura said that the rural bank relied on itself to fund up to 98 percent of its loan portfolio (deposit-to-loan ratio).

“ONB is well leveraged while staying self-reliant in terms of funding loans with cheaper own funds versus the alternative of borrowings (bills payable) which are more costly. Add to this the fact that 70 percent of ONB’s deposits represent CASA deposits, which are low cost funds versus only 30 percent in high-cost time deposits,” the bank president reported.

Total resources reached P8.6 billion so far, just a shade below the P8.7 billion in end 2008.

ONB’s capital adequacy ratio stood at a robust 20 percent level, or double the 10-percent minimum required level of the Bangko Sentral ng Pilipinas (BSP). The accepted international CAR level is eight percent.

Stockholders’ equity or networth was placed at P1.4 billion, or a 12-percent increase over P1.3 billion in the previous year.

“Note that steady growth in networth is due to 100-percent stock dividend or plow back policy,” he noted.

Non-performing loans (NPL) ratio to total loan portfolio stood at six percent albeit higher than the three percent it recorded in 2008.

Meanwhile, ONB’s branch network reached 75 while its automated teller machines (ATMs) increased to 86 units.

The country’s largest rural bank plans to open another five branches, and expand its ATM network to 112 by the end of 2009.

Buenaventura said that they will continue establishing new remittance tie-ups with bank and non-bank financial institutions involved in money transfer. It already has existing business tie-ups with MoneyGram, iRemit, UniTeller, RCBC Telemoney, BDO Remit, AUB Gintong Hatid, EPCIB-Xoom, the Philippine National Bank, the Development Bank of the Philippines, and Security Banking Corp.

It is also exploring cash management systems to expand its bank products.

ONB is a product of the consolidation of three rural banks in Mindanao last 2002. That set the tone for other consolidation efforts among the country’s rural banking system.

The three consolidated banks were the Network Rural Bank Inc., Rural Bank of Panabo and Provident Rural Bank of Cotabato. The consolidated entity formed the biggest rural bank in the country in terms of resources, assets and branch network.