Bank of Commerce “trade finance” unit up 6x since 2019
Bank of Commerce [BNCOM 8.1 2.5%] [link] disclosed that its “trade finance” business has grown significantly over the past three years, which BNCOM attributes to the reopening of the economy, higher domestic consumption, and improved global demand.
In this context, “trade finance” refers to loans and letters of credit that the bank can provide to importers and exporters to assist in buying goods.
BNCOM said that its trade finance unit started in 2019, and it has increased its annual “issuance throughput” from P3.4 billion in 2019 to P70 billion in 2022. Trade fee income from those issuances grew 750% over that same period.
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Pretty good timing on BNCOM’s part to have started that business just before the pandemic hit.
One of the biggest lessons from COVID, a reminder of how critical cash flow can be to the survival of a business, was painfully re-learned by many import/export businesses that relied on consistent cash flow at a certain level to sustain business going forward.
That’s where a bank like BNCOM can come in handy for a company that needs to buy inventory (or pivot inventory type) without the benefit of its typical stream of income, because, say, there’s a huge lockdown and nobody can go out to buy anything that you’re selling.
The fluctuating availability of factories and logistics networks in China has put further stress on businesses that don’t have cash or credit already on-hand to wait out longer-than-normal delays or higher-than-normal prices.
I don’t have any experience dealing with BNCOM in this fashion, but it’s good when a bank is accustomed to needs and particular problems that face a certain industry.
I do have plenty of experience with being in the market for banking services that fall outside of the norm, and all of the frustrations that can come from having needs that don’t fit nicely inside the “services offered” brochure at the front of the business line teller at the branch.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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