Rizal Commercial Banking Corp. and four other lenders on Tuesday downplayed the impact of their exposure to the multi-million-dollar debt of shipbuilder Hanjin Heavy Industries and Construction Philippines, which recently sought corporate rehabilitation.
“The total exposure is only 1 percent of RCBC’s assets of P614 billion and less than 2 percent of the P387 billion total net loans,” RCBC said in a disclosure to the stock exchange.
RCBC was responding to a statement by global debt watcher Moody’s Investors Service that the exposure to Hanjin’s debt would be credit negative.
Moody’s said of the five Philippine banks that lent money to Hanjin, RCBC could be the most affected because it had the largest exposure to Hanjin at $145 million.
RCBC said the five lenders had a parent guaranty from Hanjin Korea, which secures the exposure of HHIC Philippines.
RCBC confirmed that given its exposure to Hanjin, its net non-performing loan ratio of 1.2 percent as of September 2018 would increase.
“The bank’s balance sheet, with capital of P84 billion as of September 2018, is in a strong position to absorb these provisions. Even with this default, the bank’s capital adequacy ratio of 17.3 percent as of September 2018 remains very strong, well above regulatory minimum and can still support medium-term growth,” RCBC senior vice president and corporate information officer Ma. Christina Alvarez said.
BDO Unibank Inc., the country’s largest lender in terms of assets, said it was not expecting its exposure to Hanjin to have a material effect on the bank’s business, operations and/or financial condition.
“The Hanjin exposure represents only 0.15 percent of the bank’s total loan portfolio and as such is not considered a material amount,” said BDO, which reportedly had $60-million exposure to Hanjin.
Moody’s said in a report that it considered the exposures of BDO, Bank of the Philippine Islands, Land Bank of the Philippines, Metropolitan Bank & Trust Co. and Rizal Commercial Banking Corp. to Hanjin be credit negative because it would reduce their profits.
“The exposures are credit negative for the five Philippine banks because they will need to incur additional credit charges related to HHIC-Phil, which will reduce their profit,” Moody’s said.
BPI said its exposure to Hanjin amounted to only $52 million or 0.20 percent of its total loan book.
“We have partially provisioned for this and additional provisions in 2019 is manageable,” BPI said.
All five banks enjoy investment grade ratings of Baa2 with stable outlooks from Moody’s.
Metrobank, which reportedly had $72-million loan to Hanjin, also belittled the impact of its exposure to the Korean shipbuilder. “Metrobank’s exposure is low relative to our total assets of P2.1 trillion. We have adequate provisions and we do not see any significant impact to our operations,” Metrobank assistant corporate secretary Laarni Bernabe said in a filing.
State-run Land Bank of the Philippines president and chief executive Alex Buenaventura confirmed that the bank had an $85-million exposure to Hanjin.
“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.
Finance Secretary Carlos Dominguez III said the banks’ exposures to Hanjin would not significantly affect the banking industry as a whole but the problem needed to be resolved.
“We have to address it. There are assets to be had, and 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... It’s still early days. The banks have agreed to work together and see how we can move forward from here,” he said.