Stock market, bank shares drop on news of Subic shipbuilder’s bankruptcy
The Philippine financial system is strong enough to weather the bankruptcy of a Korean-owned shipbuilder, a senior Bangko Sentral ng Pilipinas (BSP) official said on Friday as bank shares and the stock market plunged on news of a looming multimillion-dollar default — prospectively the biggest in country’s corporate history.
Subic-based Hanjin Heavy Industries and Construction Philippines, which on Tuesday filed for corporate rehabilitation, reportedly owes five local banks — BDO Unibank Inc., state-owned Land Bank of the Philippines (Landbank), Rizal Commercial Banking Corp. (RCBC), Metropolitan Bank & Trust Co. (Metrobank) and Bank of the Philippine Islands (BPI) — around $412 million in addition to another $900 million to South Korean creditors.
“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 units) loans of the banking system, their exposure is very negligible,” BSP Deputy Governor Diwa Guinigundo told The Manila Times in a text message.
Guinigundo said local banks were in compliance with the central bank’s regulations, had risk management systems in place, were very liquid and exhibited sustained profitability.
“Their loan loss provisioning is more than a hundred percent. They can very well handle and manage this specific case,” he said.
Two of the five banks, in separate statements, stressed that they could manage potential losses from a Hanjin default.
“We have the provisions to take care of situations like this and have the lowest exposure among the five lenders involved,” BPI President and Chief Executive Officer Cezar Consing said.
BDO President Nestor Tan, meanwhile, said: “We have an exposure to Hanjin and we are more than adequately provided for potential losses.”
Guinigundo said Philippine banks were more than adequately capitalized, emphasizing that “their assets continue to grow and the quality of their loans based on non-performing loan ratio is less than 2 percent.”
Based on latest available data, the Philippine banking system’s gross non-performing loan (GNPL) ratio was unchanged at 1.9 percent as of end-June 2018 relative to the year earlier but slightly increased from the previous quarter’s 1.8 percent.
The loan exposures of banks remained adequately covered even as the NPL coverage ratio declined to 114.4 percent as of end-June from 119.7 percent a quarter ago, the BSP noted.
Stock market, share prices hit
Share prices of the affected banks fell on news of the Hanjin default, with RCBC dropping 9.12 percent or P2.65 to close at P26.40 apiece.
BPI lost 4.76 percent or P4.50 to P90 per share, Metrobank fell 4.82 percent or P3.95 to P77.95 and BDO fell to as low as P127.80 during intraday trading but ended flat at P131.30.
State-owned Landbank is not listed.
The benchmark Philippine Stock Exchange index snapped a two-day winning streak, bucking a global rally and plunging 1.02 percent or 81.14 points to end the week at 4,730.15. The wider All Shares declined by 0.73 percent or 34.76 points to finish at 4,730.15.
Regina Capital Development Corp. head of sales Luis Limlingan blamed the drop to profit-taking and Hanjin, a view echoed by P2P Trade Online sales associate Gabriel Jose Perez.
“With the 8,000 level just being out of reach, initial support for the PSEi is now at the 7,700 level near its recent breakout level and retest earlier this month,” Perez said.
Most sectoral indices closed in the red with financials down the most by 2.54 percent. Industrials, the only gainer, rose by just 0.10 percent.
Volume turnover stood at 5.49 billion valued at P8.5 billion.
Losers led winners, 125 to 79, while 37 issues were unchanged.