GSIS Family Bank, a subsidiary of the Government Service Insurance System (GSIS) and actively looking for a white knight, is hemorrhaging as a lender and lacking the capital to operate on competitive footing, according to government auditors.
The Commission on Audit (COA) asked its managers to improve the lender’s financial status before proceeding to its planned sale. The COA, in a report released last month, drew attention to the bank’s comprehensive net loss of P138.214 million and capital funds of only P232.424 million as of December 31, 2013.
This, the COA said, was below the minimum capital required by the Bangko Sentral ng Pilipinas for thrift banks having their head office and branches in Metro Manila.
The COA said the lender’s financial standing casts doubt on its ability to continue the business of intermediation when it neither has the capital nor the ability to make money for its shareholders, mainly the Filipino taxpayers. Its management, however, argued they have instituted certain measures that will improve both the bank’s cash flow and capital structure.
In July this year, management bared a plan to streamline operations and finance their operations by selling some of their acquired assets even as they actively pursue the sale.
“As part of our evaluation of future plans to address the various concern and our assessment on the bank, several discussions with top officials of the GSIS and the bank were conducted to verify the feasibility of the strategies of management,” the management at the thrift bank said.
The plans will require a pain-sharing arrangement with the various bank stakeholders, the regulators, the parent company and the minority shareholders.
“Timing and implementation of the plans would require the regulators’ approval and some relief and incentives to be granted, as well,” the COA said. The sale of the bank to third-party investors is expected to materialize soon as the Governance Commission for GOCCs has endorsed the GSIS proposal to dispose of its investments in the bank. The plan has been submitted to President Aquino for approval.
The regulatory support as incentives to prospective buyers of the bank was granted in principle, and awaiting the setting of the case filed by minority shareholders.
“As the sale is yet to happen, we believe that reputational risks were not mitigated, thus posing a threat to the bank’s going concern,” the COA said.
“We recommend that management pursue the actions to improve the financial condition of the bank and address its going-concern issues. Periodically monitor the status of implementation of the plans to ensure its attainment,” the COA said.
Genivi Factao