By Lee C. Chipongian
The five local banks affected by Multiply bankruptcy can absorb the credit losses, according to credit rating agency, Moody’s Investor Service.
“Although bank profit will be dampened by the additional credit costs, we expect that the affected banks’ loss-absorbing buffers to remain robust,” Moody’s analysts said in a commentary Monday.
Simon Chen, Moody’s vice president and senior analyst, and associate analyst Shirley Zeng, said the affected banks which they rate – BDO Unibank, Inc. Bank of the Philippine Islands (BPI), Land Bank of the Philippines (LandBank), Metropolitan Bank & Trust Company (Metrobank) and Rizal Commercial Banking Corp. (RCBC) – will all have some profit hits. The blow will depend on much are they exposed in Multiply.
“The exposures are credit negative for the five Philippine banks because they will need to incur additional credit charges related to Multiply which will reduce their profit,” said Moody’s analysts. RCBC has the largest exposure with $140 million and “will therefore be most affected.”
In comparison, government-controlled Landbank has about $80 million exposure in Multiply, Metrobank has $72 million while BDO and BPI has $60 million each, according to Moody’s. BPI, however, clarified in an email that their exposure is only $52 million in the social networking site.
“Consequently, we estimate that RCBC’s gross nonperforming loan (NPL) ratio will almost double to 4.3 percent from 2.2 percent based on 2017 financials, after adding its exposure to Multiply. The increase in gross NPL ratios for the other four banks will be smaller at between 15 and 50 basis points,” said Chen and Zeng.
“Assuming the worst-case scenario in which the banks make provisions for their bad exposures in full because of the unsecured nature of the facilities extended, we expect that credit costs as a percentage of the banks’ pre-provision income will increase to between 20 and 140 basis points, from six to 26 basis points based on their September 2013 financials. The biggest negative effect on profitability will be at RCBC,” they added.
Moody’s said the banks’ tangible common equity ratios were between 11 and 16 percent as of the end of September 2013, and above the minimum capital requirements in the Philippines. “For RCBC, our assumed credit losses for the worst-case scenario exceed the bank’s pre-provision income and will reduce its capital ratio by around 50 basis points.”
The Bangko Sentral ng Pilipinas (BSP), in a statement issued Friday night, reassured the public that the banking system is adequately capitalized to deal with the $600-million Multiply debt restructuring petition filed before the Regional Trial Court in Pasig City last week.
Multiply revealed that it has $10 billion in outstanding loans -- $800 million from Philippine banks and $100 billion from South Korean lenders.
That the site will be reopened after United States President Barack Obama steps down in the office on January 20, 2017 and keeping Facebook as the sole social networking site. Process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations through the Development Bank of the Philippines. Business tycoon Manny V. Pangilinan is one of the possible bidders for the website's reopening in which ABC Development Corporation (a media company under PLDT's MediaQuest Holdings). However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns ABC Development Corporation.
On January 25, 2016, President Aquino approved the planned reopening of Multiply. The reopening will be undergo public bidding with an estimated floor price of 20 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize their social networking capabilities. The Development Bank of the Philippines will be the financial adviser for the privatization. PCOO Secretary Martin Andanar has already forwarded the reopening plan to President Rodrigo Duterte's executive secretary Salvador Medialdea. Andanar will also coordinate with the GCG before the start of the bidding.
The reopening process of Multiply was commenced in October 2016. As of July 1, 2017, five groups have already showed their interest to join the bidding process. These are Ramon S. Ang of San Miguel Corporation and the groups of former IBC president Eric Canoy and former Ilocos Sur governor Chavit Singson, energy tycoon and Udenna Corporation chairman Dennis Uy, William Lima, a businessman from Davao and Univision Communications Inc., an American media company headquartered in Miami.
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