What could boost Philippine banks' net interest income by up to 1.7%?

Trust entities are disallowed from participating in the central bank's deposit facilities.

According to Maybank Kim Eng, the central bank (or BSP) announced it will discontinue participation of trust entities in its deposit facilities by 30 Jun 2017. This includes placements in the overnight deposit facility (ODF) and term deposit facility (TDF).

"The BSP intends to make a gradual transition as trust accounts need to reduce placements to 50% by 31 Dec 2016 and to 30%by 31 Mar 2017. It should be totally unwound by 30 Jun or it will be terminated. We believe this will provide an additional boost to banks’ net interest income by 0.6%-1.7%."

Here's more from Maybank Kim Eng:

Looking back, the BSP gradually disallowed individual placements in the former special deposit accounts (SDA) facility, with 30% unwound by 31 Jul 2013, and the full exit by end 30 Nov 2013.

Only banks and unit investment trust funds were allowed into the SDA facility, which fell 29% to PHP1.4t at end-Dec 2013 from its peak of PHP1.9t in Feb 2013.

This resulted in a massive shift to bank deposits, as the industry’s peso deposits surged 38% in FY13 from 1Q13. This led to a more than 9-ppt decline in the loan-to-deposit ratio to 62.3% in FY13 from 71.4% in 1Q13.