The Philippine banking system will emerge relatively unscathed after the local unit of a South Korean shipbuilder declared bankruptcy and became the largest corporate default in the Southeast Asian nation.
HHIC-Phil, the Philippine unit of Hanjin Heavy Industries & Construction Co. Ltd., launched bankruptcy proceedings on Jan. 8. The total loan exposures of five local banks — Rizal Commercial Banking Corp., Bank of the Philippine Islands, BDO Unibank Inc., Metropolitan Bank & Trust Co. and Land Bank of the Philippines — to the company is US$412 million, the Philippine Daily Inquirer reported Jan. 11.
The country's central bank sought to assure markets that the banking sector will weather the storm, pointing out that the impact on banks' capital adequacy ratios would be minimal. The Bangko Sentral ng Pilipinas said Jan. 17 that the overall exposure represents only 0.24% of the banking system's total loans.
Rizal Commercial Banking, which reportedly has the largest exposure, at US$145 million, could report at least one quarterly loss on provisioning for these loans, Fitch Ratings said in a Jan. 15 note, adding that the default does not indicate broader stress in Philippine banks' loan books and is more a reflection of the strains facing global shipping.
The core Tier 1 ratios of five lenders with exposure to HHIC-Phil are above the required minimum of 7.5%. Land Bank of the Philippines has the lowest fiscal 2017 ratio of the five at 10.93%, according to S&P Global Market Intelligence data.
Rizal Commercial Banking, Bank of the Philippine Islands, BDO Unibank and Metrobank reported core Tier 1 ratios ranging between 12.29% and 16.09% for the September 2018 quarter. Land Bank of the Philippines only reports financial data on a yearly basis.
Data pertaining to a bank's asset quality can be found at Asset Quality Detail under Financials in the bank's profile. Here is an example for BDO Unibank Inc. |
