Market Talk

Banks: SC sides with banks on PEACe bond tax. The Supreme Court yesterday ordered the Bureau of Treasury to release the 20% final withholding tax previously imposed on the Poverty Eradication and Alleviation Certificates (PEACe) bonds that matured last 18 October 2011. The PEACe bonds are zero-coupon debt sold by the government in 2001 and was originally exempted from taxes. Subsequently, in 2004, a ruling by the Bureau of Internal Revenue (BIR) declared government securities should be subject to taxes. As such, banks were ordered to keep in escrow an amount equivalent to the contested 20% withholding tax in 2011, while the issue was being settled. The BIR is reportedly looking to file a motion for consideration. We believe the impact to banks earnings would be negligible. 

Banks: Several foreign banks keen to enter the Philippines. At least seven Asian banks have expressed interest to establish a presence in the Philippines as the domestic economy strengthens and opportunities abound with only one in five households having a bank account. Among those reportedly interested are Taiwan’s Cathay United Bank and Taiwan Cooperative Bank, and South Korea’s Shinhan International Bank, Woori Bank, and Busan Bank. These are major banks in their home markets and are likely looking for growth outside their country. In February, Sumitomo Mitsui Banking Corp of Japan was given approval to set up a local branch.

-Maybank ATR-