MANILA – The financial exposure of domestic banks to debt-ridden Hanjin Heavy Industries and Construction Company Philippines can simply be stated as “very negligible” based on initial assessment by the Bangko Sentral ng Pilipinas (BSP).
Five of the country’s largest banks have a combined exposure of $412 million to bankrupt shipbuilder based in Olongapo in Zambales.
The central bank said it is aware of the fact that Hanjin Philippines filed for corporate rehabilitation at the Olongapo Regional Trial Court on Jan. 8, 2019.
“Based on our initial assessment, some banks are exposed to Hanjin but relative to both total loans of the banking system and total FCDU loans of the banking system, their exposure is very negligible,” Bangko Sentral Deputy Governor Diwa Guinigundo said Friday.
“Our banks as a whole are very strong and more than adequately capitalized, their assets continue to grow and the quality of their loans based on nonperforming loan ratio is less than 2 percent,” Guinigundo noted.
Subic Bay Metropolitan Authority (SBMA) Chairperson Wilma Eisma revealed on Thursday that Hanjin Philippines has filed for a voluntary rehabilitation due to ballooning financial obligations to Philippine and Korean lenders.
According to industry sources, the domestic bank banks are:
Land Bank of the Philippines
Banco de Oro Universal Bank
Bank of the Philippine Islands (BPI)
Metropolitan Bank and Trust Co.
Rizal Commercial Banking Corp. (RCBC)
The five creditor-banks are taking a unified action to recover their loan exposure from the embattled South Korean shipbuilder, including finding a strategic investor in Hanjin Philippines, according to BPI.
“With the five creditor-banks working together and looking for an investor as one option, the matter’s resolution is just a matter of time and we expect that to be sooner than later,” RCBC said in a statement to GMA News Online.
With the controversy out in the open, BPI noted it is best for the banks to take unified stand on the matter. “The five banks decided to hold hands and work together,” BPI president and CEO Cezar Consing said in a separate statement.
“Rest assured, that we will do what’s best for the banking industry and for the country,” Consing added.
BDO president and CEO Nestor Tan confirmed that the Sy-led lender is exposed to Hanjin Philippines, a situation that the bank is not overly concerned. “We are more than adequately provided for potential losses,” Tan said.
The central bank is unfazed by what has happened, saying there are adequate safeguards in place.
“The banks in compliance with the BSP’s regulations have risk management systems in place, they are very liquid and their profitability has been sustained. Their loan loss provisioning is more than a hundred percent. They can very well handle and manage this specific case,” Guinigundo said.
Established in 2006, Hanjin Philippines is a subsidiary of Hanjin Heavy Industries & Construction Co. Ltd. –a multi-national company that provides shipbuilding, construction, and plant services in South Korea and internationally.
The shipbuilder is the largest foreign investor at the Subic Bay Freeport Zone, according to SBMA.
In the course of its operations, Hanjin Philippines became the biggest employer among all registered businesses in the Subic Bay Freeport Zone with some 30,000 employees during its peak.
However, in face of recent liquidity problem, Hanjin Philippines has laid off more than 7,000 workers last December and is about to lay off another 3,000 early this year until its workforce is reduced to just about 300 local workers and as few as seven Korean supervisors by March for facility maintenance, according to the SBMA.
This may well be the largest corporate default in Philippine banking history, Luis Limlingan, head of sales at stock brokerage firm Regina Capital and Development Corp., said in a market commentary.
BPI’s Consing noted the assets of Hanjin Philippines are in excess of its liabilities. “If we can work on a rehabilitation program, it will be alright. It will be premature though to talk about it right now … We have the provisions to take care of situations like this.” (GMA News)
