Car dealers reeling from virus urge banks to loosen auto loan requirements

MANILA - An auto dealers' group said Monday that strict bank requirements for auto loans are hurting their business as they try to recover from almost 3 months of lockdown. 

The Philippine Automotive Dealers Association (PADA) said its members had no revenue during the enhanced community quarantine that shut showrooms. 

Auto dealers that reopened are finding it more difficult to sell cars as banks have become stricter in assessing and approving auto loans, said PADA president Willy Tee Ten. 

“We’d like to request sana that banks become more lenient when it comes to allowing buyers to loan from the banks,” Ten said in an interview with Teleradyo. 

“Kung di nila pautangin yung buyer wala rin kaming benta,” he said. 

(If they won’t give loans to buyers, we won’t be able to sell anything.)

Despite getting no revenue during the lockdown, auto dealers still needed to pay their rent, including accumulated interest on their dues, as well as the salaries of their employees. Ten said auto dealers also needed to pay banks for loans made to acquire their inventory, which they are now struggling to sell. 

Ten estimated that the auto dealership industry directly employs around 35,000 workers. 

In an interview last month, Ten said that his firm, Autohub Group of Companies, which sells brands such as Mini, Rolls Royce, Lotus, and Piaggio, had to lay off some workers because of the impact of the lockdown on the business. 


BANGKO SENTRAL: NOT OUR CALL

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said that it couldn't force banks to loosen their requirements for loan approval. 

Diokno said that while he understands the concerns of auto dealers, banks also need to make sure that their loans will get repaid by carefully screening applicants. 

“Hindi namin pwedeng i-pwersa yung bangko, diskarte ng bangko yan,” Diokno said in another interview on Teleradyo. 

(We can’t force banks, it’s their call.)

Diokno said the central bank implemented several measures to encourage banks to increase lending. He pointed to the 125 basis-point cut in the BSP’s key rate, as well as the 200 basis-point cut in banks’ reserve requirement. 

Philippine banks have ample capital and are well-positioned to withstand possible shocks from the pandemic because of low bad loan ratios, he said.

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ECB pumps up bank lending, bond buys to cushion virus impact

FRANKFURT AM MAIN, Germany - The European Central Bank on Thursday followed other major central banks with a flurry of measures to cushion the impact of the coronavirus, including increased bond purchases and cheap loans to banks, but surprised observers by leaving key interest rates unchanged.

Policymakers agreed a new round of cheap loans to banks, known as long-term refinancing operations (LTROs) "to provide immediate support to the euro area financial system," a spokesman said.

They also eased conditions on an existing "targeted" LTRO program, aiming to "support bank lending to those affected most by the spread of the coronavirus, in particular small- and medium-sized enterprises."

And the ECB will pile an extra 120 billion euros ($135 billion) of "quantitative easing" asset purchases this year on top of its present 20 billion per month.

The "quantitative easing" (QE) scheme will include "a strong contribution from the private sector," the ECB said, as room to buy government debt while respecting self-imposed limits has grown tight.

On top of the monetary measures, the ECB's banking supervision arm said it would allow banks to run down some of the capital buffers they must build up in good times to weather crises.

Its teams supervising individual lenders may provide more flexibility to institutions under their remit, such as giving them more time to patch up shortfalls in their risk management, while a broader range of assets will count towards the watchdog's capital requirements.

President Christine Lagarde will be on the spot to explain the measures to journalists at a 2:30 pm (1330 GMT) press conference.

Stock markets had plunged again early Thursday on President Donald Trump's announcement that travelers from much of Europe would be barred from entering the US, after a Monday rout triggered by an oil price war combining with virus fears.

Losses on European stock indices deepened after the ECB's announcement, with analysts citing disappointment at its decision to leave the key interest rate untouched.

But they also said that the scope for the central bank to lift the markets' mood was always going to be limited.

"We do not think the ECB will be able to change investor sentiment... What matters for the economy is the trajectory of the virus itself and the measures which national authorities take to contain it," Andrew Kenningham of Capital Economics commented.

- Paying banks to lend -
Ahead of Thursday's meeting, analysts had highlighted tweaks to the ECB's bank lending scheme in particular as a critical tool for virus response.

"Bravo!" Pictet Wealth Management analyst Frederik Ducrozet tweeted after the statement, hailing the ECB's "bold decisions".

Ducrozet noted that under the changes to the TLTRO program, lenders that loan the cash they get from the central bank on to the real economy will enjoy an interest rate potentially as low as -0.75 percent.

At 0.25 percentage points below the rate the ECB charges on banks' deposits in Frankfurt, the difference represents an effective subsidy to the financial system.

Meanwhile, the central bank dispensed with what many expected would be a purely symbolic interest rate cut of just 0.1 or 0.2 percentage points.

The US Federal Reserve last week and Bank of England on Tuesday had space to cut interest rates by half a percentage point each to ease financial conditions.

But the ECB's already-negative deposit rate robbed it of that option.

"Forget rates," Allianz chief economist Ludovic Subran tweeted ahead of the meeting.

"All eyes (are) on real measures to immunize the financial system" such as changes to the bank lending schemes and supervisory rules.

Later Thursday, Lagarde will likely reinforce the ECB's long-standing call on governments to do more with their fiscal powers to buttress the eurozone economy.

In a conference call Tuesday with European heads of government, the former International Monetary Fund (IMF) head "drew comparisons with past crises" like the 2008 financial crisis, a European source told AFP.

Such past trials were overcome by central banks and governments working in concert.

In mid-February, Lagarde reiterated that "monetary policy cannot, and should not, be the only game in town" to stimulate the economy.

Italy on Wednesday announced 25 billion euros of support to its economy and the European Union has also mobilized up to 25 billion euros.

Chancellor Angela Merkel even signalled Wednesday that Germany could abandon its balanced-budget dogma.

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China data point to steadier economy for now, but Trump victory adds to risks

BEIJING - China's economy largely showed further signs of steadying in October as expected, but disappointing retail sales growth and fears of US trade frictions under incoming President Donald Trump are increasingly clouding the outlook.

Fixed-asset investment quickened slightly and beat expectations in January-October as the government stepped up infrastructure spending to support growth, official data showed on Monday.

But a number of other indicators released over the past week from exports to bank lending, as well as expectations of a slowdown in the heated property market, suggest economic momentum may falter in the months ahead.

"On balance, today's data suggest that the recent recovery in economic activity continued into the fourth quarter," Capital Economics said in a note.

"We expect growth to hold up well for another quarter or two. However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year."

China's leaders have depended on a surging real estate market and government infrastructure spending to drive activity this year and look set to meet their growth target of 6.5 to 7 percent. The construction boom in turn has helped perk up the ailing industrial sector, spurring demand for cement to steel.

But top policymakers and investors are also clearly growing more concerned about the risks of prolonged debt-fueled stimulus.

China's overall debt has jumped to more than 250 percent of GDP from 150 percent at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say.

"I believe the overall policy tone has turned to risk management as the authorities are concerned about asset bubbles," said Singapore-based economist Zhou Hao at Commerzbank, predicting that the government will throttle back its aggressive stimulus before the end of the year.

INVESTMENT STILL HEAVILY RELIANT ON GOVERNMENT

Fixed-asset investment expanded 8.3 percent in the first 10 months from a year earlier, slightly ahead of market expectations and supported largely by government spending.

Investment by state firms surged 20.5 percent, though the pace cooled slightly from the first nine months.

In an encouraging sign, growth of private investment picked up to 2.9 percent from 2.5 percent in January-September, though it remained sluggish after hitting a record low of 2.1 percent in the first eight months of the year.

Private investment accounts for about 60 percent of overall investment in China.

Chinese policymakers have been trying to lure private investors into big infrastructure projects through public-private partnerships, but many lucrative sectors are still dominated by less efficient state firms.

UNCERTAINTIES
The most surprising miss for October was found in retail sales, though analysts were quick to note it was too early to tell if slowing consumption would turn into a trend.

Retail sales growth cooled to a five-month low of 10.0 percent from 10.7 percent in September. Analysts had forecast they would hold steady.

On Friday, Alibaba Group Holding Ltd.'s Singles' Day festival posted a record 120.7 billion yuan ($17.73 billion) worth of sales, though the gala shopping day saw growth slow as Chinese shoppers searched for deeper discounts and lower price tags.

Statistics bureau spokesman Mao Shengyong blamed the sales slowdown on a high level of comparison with last year.

"Consumption can maintain stable growth. There should not be a problem achieving this year's GDP growth targets," he told a news briefing.

October industrial output also missed expectations but to a much smaller degree, rising 6.1 percent, the same pace as in September but marginally less than forecast.

Stronger factory prices have helped boost industrial profits, relieving some pressure on companies squeezed by higher costs and weak demand, though there are concerns some of the gains are due to speculation and are not sustainable.

Data last week showed a sharp slowdown in bank lending last month, suggesting demand for mortgages is cooling after a spate of steps by local governments last month to restrict home purchases to cool soaring prices.

While property investment growth quickened in October to its highest since April 2014, some analysts suggested it could be due to a last-minute push by developers to complete construction projects as home sales and surging prices start to slow.

October exports and imports also fell more than expected, adding to doubts that the pick-up in economic activity in the world's largest trading nation can be sustained even if a trade war with the US does not materialize.

Trump had lambasted China throughout the campaign, drumming up headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and label the country a currency manipulator his first day in office.

China's top leaders are due to map out economic and reform plans for 2017 at the annual Central Economic Work Conference expected in December.

Analysts believe it's too early for the government to start withdrawing policy support now due to rising domestic and global uncertainties, despite the risk of added debt.

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