Friday, May 16, 2008 [ manilatimes.net ]
transfers propping up banks’ profits, says Moody’s
MONEY sent home by millions of Filipinos working abroad rose 9.4 percent from a year earlier to $1.4 billion dollars in March, the Bangko Sentral ng Pilipinas (BSP) said Thursday, adding this was the highest monthly level to date.
This brought the inflows for the first three months of the year to $4.0 billion, or 13.2 percent higher than the year-ago level.
Worker deployments in the first three months rose 13.6 percent from a year earlier to 263,129.
The higher inflows “reflected the rising number of Filipino workers abroad, the shifts in skill composition as well as the growing efficiency of banks and other financial institutions as remittance channels,” the BSP said.
More than eight million Filipinos, out of the national population of 90 million, work abroad.
The US, Saudi Arabia, Britain, Italy, the United Arab Emirates, Canada, Japan, Singapore, and Hong Kong were the major sources of remittances, the BSP said.
Moody’s Investors Service said significant remittance inflows from overseas Filipino workers (OFW) have been a stable source of banks’ income.
In its Global Banking report, the credit rating company said banks generated $185 million to $380 million in gross revenues from remittances last year mainly through delivery charges and the spread charged on foreign exchange rates.
This represent 8 percent to 17 percent of the total operating income of main banks offering remittance services, particularly Allied Banking Corp., Banco de Oro Unibank Inc., Bank of the Philippine Islands, Land Bank of the Philippines, Metropolitan Bank and Trust Co., Philippine National Bank, and Rizal Commercial Banking Corp.
“The direct revenues generated by the remittance business have presumably risen, or at least maintained given the strong growth in remittance flows into the Philippines over the past two years,” Richard Lung, Moody’s senior analyst, said.
The rating company said OFWs sent home on average $350 million, while the average remittance cost stood at $8 per transaction. The average transaction fee reached $3.50 and foreign exchange revenues, $144.50.
The BSP expects remittances to grow to $15.7 billion this year from $14.449 billion last year as more professional Filipinos go abroad such as medical workers, engineers, and marine officers and crew.
”In addition, the combination of rising remittance flows and the renewed interest of banks in building consumer financial services has helped revive domestically retail banking products, which have grown faster than other types of loans,” Lung said. The sharp rise in housing and auto loans over the past four years has been driven by the rising demand from OFWs and their beneficiaries, he added.
Moody’s said Philippine banks derive over 95 percent of their net income from their home markets.
Lending to OFWs provides no substantial benefit to banks due to geographic diversification. Retail and small and medium enterprise banking account for less than 12 percent of the total gross loans.
Lung said Philippine banks face the difficult task of following their clients overseas as it entails potentially higher compliance costs as regulatory requirements can differ in each jurisdiction.
“Regulatory barriers as well as differing business environments have in the past limited the ability of some Philippine banks to offer full services to OFWs in their host countries,” he said.
Moody’s estimates that banks account for 79 percent of remittance transmissions.
However, new entrants and new technology will erode banks’ dominance and the profits they derive directly from the remittance business. Wireless phone service providers have launched lower-cost remittance services via text messaging through mobile phones.
Moody’s said that if governments allow temporary Filipino workers to become more permanent residents, such a development could impact the flow of remittances as earnings directed to purchasing durables in the Philippines could be increasingly spent in host countries.- AFP and Maricel E. Burgonio
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