BSP has room to cut rates – BPI CEO

By Lee C. Chipongian

With sustainable growth and a decelerating inflation, the banking sector is more optimistic about 2024 prospects, especially since the central bank is expected to cut benchmark rate this year, according to Bank of the Philippine Islands (BPI) president and CEO Jose Teodoro “TG” Limcaoco.

“People are talking about higher inflation in the second quarter, primarily because of base effects. But our forecast, internally, is that you'll see a little bump in the second quarter, but that will again come down in the third quarter, which should give room for the BSP [Bangko Sentral ng Pilipinas] to cut rates,” he said Wednesday, Feb. 14.

Limcaoco, who is also the president of the Bankers Association of the Philippines (BAP), said BPI intends to grow along with the recovering economy this year.

The Ayala-led BPI, the country’s fourth biggest bank, currently has 11 million clients and over six million registered in its mobile app.

Limcaoco said that of the six million BPI mobile app registered users, 4.5 million are active.

“We plan to increase from 11 million to something quite significant, significantly higher than that by the end of this year,” he said.

This might be an easy task for the bank, which at one time was the largest lender in the Philippines.

The bank CEO is sure they can sustain its growth momentum as it grows the population under its mobile apps.

Limcaoco noted that with the growth in the economy, there is more consumer confidence and therefore more financial consumers. The country’s gross domestic product or GDP grew 5.6 percent in 2023, one of the highest among emerging economies, despite that it fell below the government target of six percent to seven percent.

There is more to consumer confidence after the US Federal Reserve decided to pause its tightening bias, which in turn also halted the BSP rate hikes. The last time the BSP increased its benchmark rate was in an off-cycle decision on Oct. 26, 2023 to ensure inflation expectation remain anchored to the central bank target.

Limcaoco said he is “comforted by the fact that, for the most part, the rise in interest rates has stopped and people are looking forward to falling interest rates by the second half of the year, so that bodes well for the economy.”

He also noted that in 2023, “our credit card book grew 38%. Our auto loan book grew 24%, and our total loan book grew 10 and a half percent for the year when we were expecting it to only grow 8 percent.” Overall, the bank posted a net income of P51.7 billion last year, up by 30.5 percent year-on-year.

For 2024, the bank will also take advantage of its agency banking. Limcaoco said this strategy “means we are not relying solely on our own branches and digital platforms, but you can also have access to pur products and services from different partner merchants.”

BPI has merged with the Gokongwei Group’s Robinsons Bank Corp. with BPI as the surviving entity. The merger is a done deal as of Jan. 1 this year. With the additional network, on top of the Ayala mall network, BPI’s reach has significantly expanded by over 5,000 onboarding partners.

BPI Research earlier said that they expect BSP to cut the key rate by the second half of 2024, and that this should “provide relief to those who borrowed heavily before the 2022 rate hikes.”

BPI analysts noted that consumer and investment spending will expand as inflation gradually decelerates to within the BSP target range of two percent to four percent. In January, the inflation rate stood at 2.8 percent from 3.9 percent in December.

The bank agreed with the BSP that inflation will continue to decelerate this quarter due to base effects but may start rising again in the second quarter and possibly breach four percent before dropping back to within the government target range.

Meanwhile, for this year, BPI expects GDP to grow by 6.3 percent, below the government target of 6.5 percent to 7.5 percent.