By Ralf Rivas, January 14 2019; Rappler


Image Credit to Hanjin Heavy Industries and Construction Philippines

MANILA, Philippines – The biggest loan default in Philippine history will have minimal impact on the public, according to banks and government regulators.

Five of the country’s largest banks have a combined loan exposure of $412 million after Hanjin Heavy Industries and Construction Philippines went bankrupt and appealed for rehabilitation.

Bank of the Philippine Islands (BPI) president and chief executive officer Cezar Consing said on Monday, January 14, that the country’s banking industry remains robust.

“The percentages involved are small relative to the size and strength of the Philippine banks,” Consing said.

A report from the Philippine Daily Inquirer said that BPI has a loan exposure of around $60 billion. Other banks involved are Rizal Commercial Banking Corporation (RCBC), with total exposure of $140 million; Land Bank of the Philippines with $80 million; Metrobank with $72 million; and BDO Unibank with $60 million.

RCBC president Gil Buenaventura said that while they have the biggest loan exposure, they have experience and safeguards in place.

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Meanwhile, the Bangko Sentral ng Pilipinas (BSP) said the country’s banking system can manage the crisis.

According to the BSP, the total exposure is only 0.24% of all loans in the country’s banking system.

The 5 banks have separate credit arrangements with Hanjin, but are working together to take over the embattled company.

“Discussion is still ongoing. It will be premature to talk about specifics. But rest assured that we will do what’s best for the country and the banking industry,” Consing said.

Losses and opportunities

April Lee Tan, head of research of COL Financial, said that BPI, BDO, and Metrobank can absorb potential losses.

“Based on COL Financial’s estimates, the potential impact on the big three’s profits, assuming they fully provide for the losses, is only 10.3% for BDO, 13.3% for BPI, and 16.5% for [Metrobank] based on their projected 2018 profits,” Tan said.

She added that the impact on RCBC is more substantial given the larger amount of its exposure and its size relative to the other banks involved.

Tan estimated the potential impact on RCBC’s losses at 166.1% based on the company’s projected 2018 profits.

Banking stocks led the decline of Philippine shares on Friday, January 11, an upset for many investors who were expecting the index to hit the elusive 8,000 mark.

Tan said investors should take advantage of the drop in banking stock prices and buy them at cheaper valuations. – Rappler.com