The filing for corporate rehabilitation by shipbuilder Hanjin Heavy Industries and Construction Company Philippines will hurt local banks with exposure to the company and the banks involved should work together to address the problem, Finance Secretary Carlos Dominguez III said over the weekend.
“We have to address it. There are assets to be had. Well, this is a difficult problem to be worked through by the banks,” Dominguez said in an interview.
“It’s going to hurt, but it’s certainly not going to end up hampering them, but it’s going to hurt… But it’s still early days. The banks have agreed to work together and see how we can move forward from here,” he said.
Dominguez said one thing the banks should consider is the prospects for the shipbuilding industry. “The real important thing is what are the prospects in that industry? Are there good prospects in the industry?” he said.
When asked if the Finance Department was ready to mediate, Dominguez said: “We don’t know yet. We’re not the lead bank. The lead bank is RCBC [Rizal Commercial Banking Corp.]. We will work along with all the other banks.”
Dominguez is also the chairman of state-owned Land Bank of the Philippines which also has exposure to Hanjin.
LBP president and chief executive Alex Buenaventura said the bank had an $85-million exposure to Hanjin, contrary to earlier reports of $80 million.
“We’ll have to address the problem. But the good news is we can recover the assets. The shipyard is worth $1.2 billion and the total exposure of the creditors is less than $400 million. Down the road, we hope to recover our exposure,” Buenaventura said.
Buenaventura expressed optimism on the shipping industry, saying shipbuilding supports global development.
“But the global economy is improving. There’s a lot of moving goods through ships…,” he said.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo also downplayed any significant impact to the banking industry of the reported loan exposures of some banks to Hanjin that filed for corporate rehabilitation at the Olongapo Regional Trial Court.
Guinigundo said banks’ exposures were “very negligible.”
“We received report that Hanjin filed for corporate rehabilitation at the Olongapo Regional Trial Court on Jan.8, 2019. Beyond this, it would be most premature for the BSP to comment on a matter pending with the court,” Guinigundo said.
“Based on our initial assessment, some banks are exposed to Hanjin but relative to both total loans of the banking system and total FCDU [foreign currency deposit unit] loans of the banking system, their exposure is very negligible,” he said.
He said Philippine banks as a whole were very strong and more than adequately capitalized. Banks’ assets continued to grow and the quality of their loans based on non-performing loan ratio was less than 2 percent.
“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 provisions is more than a hundred percent,” Guinigundo said.
Reports on ABS-CBN said that five universal and commercial banks—RCBC, Land Bank of the Philippines, Metropolitan Bank & Trust Co., Bank of the Philippine Islands and BDO Unibank Inc were seeking to recover some $412 million in combined loans to Hanjin and were looking at “all kinds of alternatives,” including talking to strategic investors.
BPI president Cezar Consing said the banks were in close contact with one another “will do what’s best for the banking industry and for the country.”
“This is something that the banks can handle. We have provisions for this sort of thing,” Consing told ANC.