Banks’ trust funds shrink to P2.52 T

MANILA, Philippines - Philippine banks had reported that assets under management (AUM) overseen by their trust department slightly shrunk in terms of value to P2.52 trillion end 2014 from P2.57 trillion in 2013.

Roughly half of the total volume is unit investment trust fund (UITFs) accounts or a pool of investments made by individuals and institutions with a trust department of a bank, and licensed by the Bangko Sentral ng Pilipinas (BSP).

Banks with trust licenses total 31, which are predominantly commercial banks. Five are thrift banks, six are foreign banks and one is a specialized commercial bank.

BDO executive vice president and Trust and Investments Group head Ador Abrogena explained that one reason for the decline in value, is that investors are cashing in on the outstanding performance of the equity market.

The Philippines Stock Exchange Index (PSEi) has risen to record levels of 7,800, or an unprecedented six consecutive year streak.

Abrogena said that expectations remains that 2015 will see the market go for its 7th consecutive streak again, despite the markets valuation still over 18 percent.

The main reason for the historical run is the strong performance of the Philippine economy, second best only to mainland China.

The country’s five-year run of growth over six-percent and the strong fourth quarter gross domestic product last year of 6.7 percent, only indicates that the pace could well be carried over to the first semester of 2015.

Also aiding the country’s growth pace is the weakening of the world oil prices, which not only reduces domestic prices and boosting further consumer spending.

Savings from lower import bill results in potential public spending on key infrastructure activities this year and the next.

Not content, the Philippine will see further liquidity being poured into the system due to mounting election spending moving into 2016.

Abrogena said that investors in the UITFs are now benefiting from their long-term investments, and they are starting to redeem and spend.

Meanwhile, the top three banks with substantial trust accounts are BDO Unibank Inc., the Bank of the Philippine Islands (BPI), and the Metropolitan Bank & Trust Co. (Metrobank).

The combine value of the three leaders is equivalent to more than half of the total value, or roughly P1.5 trillion.

BDO accounts for P597 billion or 23.67 percent market share of the total trust pie. BPI manages P522 billion or 20.68 percent share, and Metrobank will P333.2 billion or 13.20 share.

The leading government-run banks with significant trust accounts are the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP). Together, they managed approximately P189 billion worth of AUMs.

The only foreign bank in the top 10 is Standard Chartered Bank, which manages P220.6 billion.

BDO Private Bank is the fifth largest manager with almost P220 billion.

The other members of the top 10 banks with huge values of their trust accounts are the United Coconut Planters Bank, Rizal Commercial Banking Corp., China Banking Corp., and the Philippine National Bank.

RCBC Savings Bank is the leading thrift bank with significant trust funds amounting to P16.3 billion, followed by China Bank Savings Bank with P5.3 billion.

A trust fund comprises of a variety of assets intended to provide benefits to an individual or organization. It must be managed by a trust licensee, which is issued and supervised by the BSP.

It comprises cash, stocks, bonds, property and other types of financial products. These in turn are either peso- or US dollar denominated. A few are invested in feeder funds or fund-of funds, which are in turn invested in foreign funds.