Banking Environment in the Philippines

8/8/2019 Banking Environment in the Philippines

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GLOBAL BANKING & MARKETSPROJECT AND EXPORT FINANCE

THE PHILIPPINES A BANKING OVERVIEW

PREPARED FOR THE PHILIPPINE TOURISM INVESTMENT FORUM

9 NOVEMBER2010


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HSBC Capabilities in the Philippines

Corporate Banking: The alignment of the corporate, commercial, investment banking andtreasury businesses has allowed the Bank's dedicated relationshipmanagement team to gain a deeper understanding of customers'every requirement to offertailor-made, value-added solutions.

Debt Capital Markets: Strong capital markets presence and experience, with HSBCs

impressive abilities in project structuring, origination, syndication,underwriting and transaction management.

Equity Capital Markets: Unrivalled access to the worldwide equity markets as well as a fullrange of advisory services to public sector bodies and listed andprivate companies.

Global Markets: HSBC is a major market makerin the Peso and Foreign Currencyfixed income and money markets. A wide variety of foreign exchangeservices including spot, swaps, forward contracts, derivatives andother structured products are also offered.

Insurance: HSBC Insurance Brokers (Philippines) Inc. specialises in businesscontinuity solutions, wealth management and employee benefits.

HSBC, the second oldest bank

in the Philippines, opened its first

branch in Binondo in 1875.

The HSBC Group in the

Philippines consists of8 Main

Bank Branches, 16 Savings

Bank Branches and 3 HSBC

Group Service Centers, together

employing over8,000 people.

HSBC has 22 Corporate

Banking Relationship Managers

in the Philippines.


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HSBC Capabilities in the Philippines

Investment Banking: Drawing on the expertise of industry teams from the region, HSBCoffers specialist advice on mergers and acquisitions, privatisations,equity capital raising and structured finance.

Payments and CashManagement:

A leading provideroffering the full range of domestic, regional andglobal solutions that include collections (Integrated ReceivablesSolutions), disbursements (Integrated Payments Solutions) and

liquidity management (Liquidity Management Solutions), ElectronicFiling and Payment System for Philippine government Tax Payments,accessible through HSBCs delivery channels, HSBCnet, HSBCConnect, and B2G (Business to Government) E-Tax, with the ability tointegrate with companies ERP platforms.

Project and ExportFinance:

Strong expertise in project finance is provided.

Securities Services: HSBC provides comprehensive global, regional and domestic fundservices including fund administration, global custody, corporate trust

and loan agency, and sub-custody settlement and services to theinternational asset management industry. We are the leading choice ofglobal custodians, broker dealers and fund managers, and thereforecapture the largest share and trade settlement volume in the country.

Trade Services & SupplyChain:

A wide range of import and export services and trade finance facilities.It is also a pioneer in electronic banking solutions in the Philippines forexporters and importers.


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The Investment and Infrastructure Challenge

The quality of infrastructure and

the attractiveness of the tourism

investment proposition are linked

The Government is thereforeadopting a twin track

approach, inviting investment in

both tourism and infrastructure

using recognised models to

attract direct investment

The Philippines is far from alone

in facing similar challenges

Breaking the vicious circle

Poor infrastructure restricts

general investment

Private sector activity

is constrained

Private and public income

remains low or will be reduced

Available funds

are limited

Infrastructure remains

outdated

Poor condition of infrastructure

discourages private investment

Economic growth is hindered


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The PPP Approach: Roles

PPP models have been

established and are working in

many places around the world

The international bankingcommunity and the pool of

available development finance is

familiar with the model

Government:

1. Sets legal and regulatory framework;

2. Identifies, scopes and develops projects; and

3. Underpins unmanageable risks.

Private Sector:

1. Verifies project framework, bids;

2. Undertakes design, build, operation; and

3. Provides funding (debt and equity).


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Favourable Local Funding Environment

0

200

400

600

800

1,000

1,200

2 00 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7 2 0 0 8 2 00 9 2 0 10YT

yPHILIPPINE RESERVE MONEY

Source: 3 November, BangkoSentral ng Pilipinas

4

9

Jan

pr

Jul

Oct

Jan

9

pr

9 Jul

9 Oct

9 Jan

pr

Jul

Oct

yPHILIPPINE FIXED RATE TREASURY NOTE YIELDS (2008 2010YTD)

Funding Considerations:

Historically low yields for fixed-

rate borrowers

Very strong momentum and

demand for long-term Philippinecorporate paper

nshore USD and PHP

liquidity in the Philippines is high

Particularly strong demand

from onshore and offshore retailand High Net Worth Individuals

Positive outlook and sentimentand Philippine Macroeconomic

factors and Philippine

government

Source: 3 November,

Bloomberg


7/15

Sources of debt finance - local

Capital Markets PrivatePlacement and Domestic Banks

Capital Markets Public Bonds

Liquidity (per transaction)PHP5-15 billion

(US 100 300m)

PHP10-15 billion

(US 200 300m)

TenorUp to 5-7 years, with limited

demand for 10 yearsUp to 5-7 years, with limited

demand for 10 years

Currency PHP (or US$) PHP

Rates Fixed or floating Fixed

Timetable 7- weeks 13-1 weeks

Requirements / ConstraintsSingle-Borrower Limit (SBL) on

lenders

Requires SEC Registration

Need AAA domestic rating

Advantages Liquidity / Terms / FX hedge Size / tenor

Mixed economy of domestic

banks

Bank and capital markets

products (note: overlap betweenprivate placemen/domestic

banks)

Tenor tends to be relatively

limited

Deals tend to be bilateral and

club


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Sources of debt finance commercial international

International Banks (commercial) Capital Markets USD Bonds

Liquidity (per transaction)

US$100m

(onshore)

~US$200-500m (offshore)

US$200 to 500 million for US$Reg S Bonds

TenorCorporate Level : Up to 5 years

Project Finance : 10-12 years

Up to 5-7 years, with limitedappetite for 10 years

Currency US$ (limited PHP / swapped) USD

RatesFloating or

SwappedFixed

TimetableCorporate level : 10-12 weeks

Project finance : 3-6 months10-12 weeks

Requirements / Constraints

Limited local

booking / PHP

Funding

FX risk, higher costs

Advantages No SBL constraints offshore No SBL constraints

International banks are present

and can off-shore structures to

allow larger deal volumes

Syndicated or club approach

US$ borrowing requires US$

revenue flows; limited capability

for swaps


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Sources of debt finance DFIs and bilaterals

Eligibility criteria need to be met

Development or capital account

driven

Generally co-lending approach

Can significantly increase deal

volumes

Multi-Lateral AgenciesBilateral Development

AgenciesExport Credit Agencies

Liquidity (per transaction)

Up to US$250m each (or25%

of project size)

US$30-70m

eachPotentially > US$500m

Tenor 10-15+ years 10-15 yearsECD guidelines, up to

1 .5

years

Currency US$, can swap in PHP US$, some can do PHP

Rates Floating or swapped Floating or swappedFixed or floating (or

swapped)

Timetable 6- months 6- months 12 - 16 weeks

Requirements /Constraints

Development aspect

pen tendering processDevelopment aspect

Eligible content

Upfront premium

AdvantagesTenor, Withholding tax exemption

Concessionary programs


10/15

Awards & Accolades Corporate Banking Philippines

Source The Asset Triple A House

Best Sub-Custodian (2006-2010)

The Asset Triple A Transaction

Banking Awards

Magat Hydro PowerPrivatizationPhilippines

Asia Pacific Power Deal of the Year

HSBC acted as Mandated Lead Arranger,

ffshore Collateral Trustee, AccountsTrustee

Source Project Finance International


Magat Hydro PowerPrivatization

PhilippinesBest Project Finance / Best Privatization

HSBC acted as Mandated Lead Arranger,

ffshore Collateral Trustee, AccountsTrustee

Source Global Custodian

Top Rated (1996-2009)#1 in Leading Clients

Category (2007-2009)Global Custodian Emerging Markets

Survey

Best Sub-Custodian

Global Investor Survey

Weighted Category, 2008 and

2009

Unweighted Category, 2009

Source Global Investor Magazine

Source The Banker May 2008

The Banker Awards -Deals of the Year 2007Country Winner -Phil ippines -

Ayala Corporation's Ps5.8bnperpetual preferred shares

HSBC acted as Joint IssueManager/ Joint Lead Underwriter/Joint Bookrunner

Source PDS Group

#1 Greenwich SalesQuality Index

Greenwich Large Corporate

Treasury Management Research

2009

Source Greenwich Associates

#1 GreenwichRelationship QualityIndex



2009


#1 Greenwich OverallQuality Index



2007


Source Global Finance

Best Sub-CustodianPhilippines

Global Finance: Best Sub-Custodian

Banks 2004-2007 and 2009-2010


Best Domestic Custodian(2008-2010)Philippines

The Asset Triple A Transaction

Banking Awards

PhilippineDealing SystemHoldingsCorporation

Top custody house for 2008-2009


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Awards & Accolades Global Markets Philippines

Greenwich FX Survey 2008#1 Market Penetration in Fixed Income (InsuranceCompanies)#1 Market Penetration in Interest Rate Derivatives(users $100-500mio)

Greenwich FX Survey 2007#1 Market Penetration in FX Services#1 Market Penetration in Interest Rate Derivatives#1 Market Share in Interest Rate Derivatives

AsiaMoney FX Survey 2008Best for Overall FX ServicesBest for Innovative FX Products and Structured IdeasBest Single Electronic Trading Platform

AsiaMoney FX Survey 2007Best Overall FX ServiceBest For Innovative FX Product and Structured IdeasBest FX Prime Brokering Services For Asian Clients

In particular, the bank was able to deliver all-in financing packages for cross-border borrowers with bundled swaps, sometimes at levels insideinternational funding costs. HSBC led 86 cross-border deals in local currencies worth $3.1 billion, which was more than three times the numberand almost twice the value of its closest rivals.

It ranked first in the Asian domestic currency league tables, top in the individual markets of Hong Kong, Indonesia, Malaysia, Philippines andSingapore, and out-ranked its nearest competitor in six of the regions major markets. HSBCs diverse spread of business and its wide

geographical penetration defies any criticism that it relies too heavily on its natural Hong Kong home-base. In fact, it led local currency deals forissuers from 21 different nations, with a range of structures

FinanceAsia, December 2008

Its emerging markets credentials were fully on display as it was engaged in the most significant theme of regional DCM in the year: theemergence of domestic debt.

At a time when the US investment banks were finding it tough to survive, let alone compete, HSBC benefited from a flight to quality in terms ofcounterparty risk appetite and an increase in business due to its stable and very local business model.

Deals in Malaysian ringgit from State Bank of India and in Thai baht from Kexim pay testament to the strength of its swap desks in those countries.It is the lubricant in the machine that enabled HSBC to offer a full range of funding options throughout Asia. In 2008, that combination proved vitalas the US dollar bond market suffered from severe dislocation.

IFR Asia, December 2008

Domestic BondHouse of the Year

Best LocalCurrency Bond

House


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Awards & Accolades Global Markets Philippines

Interest Rates

G3 DenominatedProducts

Best Overall Provider

Broadest Product Range

Best Ideas and MostInnovative Products

Best StructuringCapabilities

Best Pricing andExecution Capabilities

Best Training andEducational Support

Best After-Sales Service

Interest Rates

Local CurrencyProducts

Broadest ProductRange



Best After-SalesService

CurrencyLocal Currency

Products

Best verall Provider

Broadest Product RangeBest Ideas and MostInnovative Products



Best Research andMarket Coverage

Best Training and

Educational Support

Best After-Sales Service


13/15

Selected PEF Credentialsy Award-winning

financing for the

privatisation of 360 MW

hydro power project

y US$ and PHP multi-

source financing

(including the IFC)

y Project exposed to

electricity market risk

y HSBC only international

commercial bank in the

financing

y HSBC supported the bid

by International Power

and Mitsui for the

acquisition of Mirant

Philippines asset

y Large US$2+ billion

debt commitment

y Multi-source financing

with JBIC

y HSBC acted as accountbank, onshore and

offshore security agent

and facility agent for

US$1.1 bio. financing of

Masinloc Power

Partners acquisition of

600 MW Masinloc

power plant

y Multi-source financing

with IFC, ADB,

domestic andinternational banks

y HSBC arranged the

refinancing of Mirant

Philippines debt for Sual

and Pagbilao power

plants

y Successful financing

upscaled due to strong

demand by the market

2006

Mirant AP LtdPhilippines

US$700 million

MLA

y HSBC acted as solesolicitation agent and rating

advisor to Quezon Power in

relation to their outstanding

US$175 mio. bond

y Excellent response to well

structured and priced

request

y HSBC advised Shell on

farm-in agreement with

Texaco for the Malampaya

gas field

y Consideration: US$ 1

billion

2007

Magat

HydropowerPhilippines

Asia Power Deal of theYear 2007 PFI

Magazine

US$380 millionMLA, Offshore Security

Trustee

2006

Mirant

AcquisitionPhilippines

c. US$2 billionMLA in support of bid

for acquisition

1999 2001

Malampaya

Farm-InAgreement

Philippines

c. US$1 billionAgreement with Texaco

equiv. to 45% of

Malampaya FieldFinancial Advisor

2007

Quezon PowerPhilippines

US$175 millionConsent solicitation to

enable recapitalisationSole Solicitation Agentand Ratings Advisor

2007

Masinloc Power

PartnersPhilippines

US$1.1 billion

Account Bank, Onshoreand Offshore SecurityTrustee, Facility Agent


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HSBC Leading Bondhouse in the Philippines

yHSBC has led successful transactions for the Sovereign, Quasi-sovereign, Financial Institutions and Corporate issuers in Philippines

yBest Debt House for

the Philippines

y2008 and 2009

yThe Asset

y HSBC was recently awarded Best DebtHouse in the Philippines 200

by the

Euromoney Awards for Excellence and Best

Debt House in the Philippines 200

by The

Asset Asian Awards, a repeat success which

we were also awarded in 2008. These awardsrecognize HSBCs unmatched execution and

distribution capabilities in both the Philippine

capital markets and global markets.

yPHP44.109 billion Global PesoyBonds Due 2021

ySept 2010

yJoint Lead Manager and Bookrunner

yRepublic of the Philippines

yUSD1.5 billion Re-opening

yof Global Bonds due 2020 and 2034

yJanuary 2010

yJoint Lead Manager and Bookrunner


yUSD250.0 million Senior Notesydue 2020

yMarch 2010

yInternational Container Terminal

yServices, Inc.

yPower Sector Assets &

yLiabilities Management Corporation

yRetail Bonds due 2015 and 2017

yJoint Issue Manager and Bookrunner

yApril 2010

yPHP30.0 billion Fixed RateyPHP10.0 billion Fixed Rate Putable

Bonds due 2017 and putable 2015

yApril 2010

yJoint Lead Underwriter

yAyala Corporation

yUSD200.0 million Re-opening ofySenior Notes due 2020

yMay 2010

yJoint Lead Arranger and Bookrunner

yInternational Container Terminal

yServices, Inc.

yJoint Lead Arranger and Bookrunner

yJanuary 2010

yPHP1.0 billion Inverse Floating RateyNotes due 2015

yJune 2010

ySole Lead Manager and Bookrunner

ySM Prime Holdings, Inc.

yBest Debt House for

the Philippines

y2009

yEuromoney

yUSD3.2 billion Global Bond Exchange

Offer for New Global Bonds due 2021 and

Re-Opening of 2034

yOct 2010

yJoint Dealer Manager and Bookrunner


yPHP4.339 billion Long-Term NegotiableyCertificates of Time Deposit due 2015

yMay 2010

ySole Lead Arranger and Bookrunner

yRizal Commercial

Banking Corporation

yUSD400 million Fixed Rate Bonds

due 2017 and Exchange Offer for

existing 2013s and 2014s

yOct 2010

yJoint Dealer Manager, Lead Manager

yand Bookrunner

ySM Investments Corporation

y1

yNo. 2 for PHP Bonds

o

Boo

r

nn

rs of PHP Bonds

2010 YTD

!

n

N! "

PHP"

#

ss

s %

1 First Metro 18,917 7 32.62 H

$

B%

&

'

( 2) 0 1

22

.'

3 Development Bank 10,000 2 17.24 Allied Banking Corp 1,667 1 2.95 PNB Capital & Investment 1,667 1 2.96 BDO Capital & Investment 1,250 1 2.27 BPI Capital Corporation 1,250 1 2.28 Citi 1,250 1 2.29 ING Groep NV 1,250 1 2.210 RCBC Capital 1,250 1 2.2

o

Boo

r

nn

rs of P3 4 5 4

4

n

s 6$

7 Bonds

2010YTD

!

n

N! "

6

$

8

"

#

ss

s %

& H$

B% 9 9

)

1

2@

.22 Deutsche Bank 713 4 18.73 UBS 667 6 17.54 Citi 585 5 15.45 Barclays 500 2 13.16 JP Mor an 125 1 3.37 Standard Chartered 125 1 3.38 Bank of America 80 1 2.19 Standard Bank 80 1 2.110 Morgan Stanley 50 1 1.3

yNo.1 for Philippines USD Bonds

A

op BooB

rC nners of PhilippinesD

ll Bonds

2010YTD

Rank Name US$ m Issues %

1 HSBC 1,436 13 20.82 UBS 1,167 7 16.93 Deutsche Bank 879 5 12.84 Citi 779 7 11.35 Barcla s 500 2 7.36 FMIC 417 7 6.17 Credit Agricole 300 1 4.48 JP Morgan 292 2 4.29 DBP 223 2 3.210 Credit Suisse 167 1 2.4

yNo. 1 for Philippines All Bonds

ySource: Bloomberg, 3 November 2010


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Banking Environment in the Philippines

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