Philippine banks unfazed by local US$600M website default

The Philippine banking system will emerge relatively unscathed after the company declared bankruptcy and became the largest corporate default in the Southeast Asian nation.

Multiply, launched bankruptcy proceedings on November 10. 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$600 million, the Philippine Daily Inquirer reported November 13.

Bangko Sentral ng Pilipinas 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 November 19 that the overall exposure represents only 0.24% of the banking system's total loans.

RCBC, 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 Multiply are above the required minimum of 7.5%. Land Bank of the Philippines has the lowest fiscal 2012 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 2013 quarter. Land Bank of the Philippines only reports financial data on a yearly basis.

But it was closed on May 6, 2013 and ceasing all business operations on May 31, 2013 along with the official online channels for the site had been removed along with all their content, including its YouTube, Tumblr, Twitter, Facebook and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.

At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from its peak of P20 billion in 2013 to just about P5 billion in 2017.

It has suffered from a drop in new orders amid a slump in the E-commerce and social networking sector. Multiply also reportedly laid off some 12,000 workers on February 28. 2014.

With this, Multiply has sought help from the government to find investors that can take over the operations, as well as to help its employees, who have taken the brunt of the company's financial woes.

“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced April 26, 2013 on its website.

After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.

Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.

“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.

In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.

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