Philippine Daily Inquirer - - BUSINESS INQ - —BENO. DE VERA

Yuchengco-owned Rizal Com­mer­cial Bank­ing Corp. (RCBC) will be the most ad­versely af­fected by its loan ex­po­sure to the trou­bled Philip­pine ship­build­ing arm of Korean con­glom­er­ate Han­jin, debt watcher Moody’s In­vestors Ser­vice said Mon­day.

Given that RCBC has the big­gest ex­po­sure to Han­jin Heavy In­dus­tries and Con­struc­tion Philip­pines (HHICPhil) of about $140 mil­lion, it “will there­fore be most af­fected,” es­pe­cially the bank’s profitabil­ity, Moody’s said in a re­port re­leased on Mon­day ti­tled “Banks’ ex­po­sure to trou­bled Han­jin will at­tract higher pro­vi­sions, a credit neg­a­tive.”

“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 HHICPhil,” Moody’s said.

“For RCBC, our as­sumed credit losses for the worstcase sce­nario ex­ceed the bank’s pre­pro­vi­sion in­come and will re­duce its cap­i­tal ra­tio by around 50 ba­sis points,” it added.

Across the five banks with to­tal ex­po­sure of about $412 mil­lion, which be­sides RCBC in­cluded BDO Uni­bank Inc., Bank of the Philip­pine Is­lands, Land Bank of the Philip­pines, as well as Metropoli­tan Bank and Trust Com­pany, Moody’s said their ex­po­sures were “credit neg­a­tive … be­cause they will need to in­cur ad­di­tional credit charges re­lated to HHIC-Phil, which will re­duce their profit.”

“The in­crease in gross NPL ra­tios for the other four banks will be smaller at be­tween 15 and 50 ba­sis points,” Moody’s said.

“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’ pre­pro­vi­sion in­come will in­crease to be­tween 20 and 140 ba­sis points, from six to 26 ba­sis points based on their Sep­tem­ber 2018 fi­nan­cials,” ac­cord­ing to Moody’s.

The debt watcher deemed that the af­fected banks’ prof­its “will be damp­ened by the ad­di­tional credit costs” even as their loss-ab­sorb­ing buf­fers would “re­main ro­bust.”

“The banks’ tan­gi­ble com­mon eq­uity ra­tios were be­tween 11 per­cent and 16 per­cent as of the end of Sep­tem­ber 2018, and above the min­i­mum cap­i­tal re­quire­ments in the Philip­pines,” Moody’s noted.

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