RP banks pay top execs P74.4B in 2009

PHILIPPINE banks spent an increasingly large amount of their earnings in 2009 for executive pay, the package having grown by more than 10 percent during the year to P74.4 billion, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

In a status report, BSP Governor Amando M. Tetangco Jr. said bank executive pay was the single-biggest noninterest expense incurred by banks last year, when P6.9 billion more compensation and fringe benefits were given the lucky employees.

Because management might have been much too generous on themselves, Tetangco said the BSP has served the industry notice they are keenly watching the numbers.

“Following the highly publicized outrage of American taxpayers on the exorbitant bonuses paid to key officers of the ailing insurer American Insurance Group after receiving close to $180-billion bailout money from the Federal Reserve in 2008, the BSP is likewise keeping a close watch on the fringe benefits and bonuses paid to directors and key officers of BSP-supervised institutions,” Tetangco said.

According to him, the close scrutiny is warranted because “75.4 percent of [bank] operations is funded by deposits generally sourced from the public.”

Bank executive-pay packages last year accounted for 35.8 percent of the banks’ noninterest expense, structure or much higher than a year-ago level, when such accounted for only 33.8 percent of total expenses.

Executive pay was far larger than expenses allotted for taxes and licenses, which accounted for only 9.1 percent of total, or only P18.9 billion. This was, in fact, an improvement from year-ago expenses totaling P18.4 billion, or 9.2 percent of total.

What the banks paid their executives was also larger than what the industry paid for depreciation and amortization, which accounted for only 8.3 percent of total expenses, or only P17.3 billion.

In 2008 the banks spent the equivalent of 8.1 percent of total, or P16 billion.

The BSP reported that interest income was still be the main source of the banks’ revenue stream, accounting for 66.4 percent of total operating income and 3.4 percent of the total assets of the banking system.

Cooperative banks, often reporting the highest administrative costs to make up for economies of scale, collected the highest fee-based income during the year.

High administrative costs often arise from their exposure to small-scale or micro-lending practices.

Cooperative banks often also have substantial exposure to calamity-prone agricultural areas.

As a result, cooperative banks have a more balanced proportion of interest and noninterest-based income compared with other banking categories, the BSP said. –Jun Vallecera / Reporter, Businessmirror