THE loan default of Hanjin Heavy Industries and Construction-Philippines (HHIC-Phil) may have challenged the affected banks’ operating environment, but is unlikely to materially impact the overall stability of the Philippine financial system, an international think tank said.
In an assessment paper released on Tuesday, Fitch Solutions—the research arm of Fitch Group—said the Philippine banks’ exposure to the troubled company is “not a systemic problem and is unlikely to threaten financial stability in the country in the near term.”
“Crucially, Philippine banks as a whole have strong capital buffers and low nonperforming loans on their balance sheets,” Fitch Solutions said, noting further that there is a “low concentration risk” as the HHIC-Phil’s loan exposure is shared by five banks.
Fitch Solutions added, “Secondly, all five banks have reportedly come together to take control of Hanjin’s assets in the Philippines, and agreed that no single lender will unilaterally seize the company’s assets. This should give the company some time to rehabilitate, and there has been precedent of lenders being able to recoup their losses after the period.”
Last, it noted, “the Philippine banking system as a whole boasts robust capital and liquidity buffers, while asset quality remains healthy, with the nonperforming loans ratio well-below crisis levels.”
Rough time for banks
Fitch, however, warned that Philippine banks will be sailing in rough seas ahead, not only due to this loan —which is seen to be the biggest in the recent history of Philippine banking—but because of other factors, as well.
“…We maintain our expectation for credit growth to slow and asset quality to weaken over the coming quarters, as the operating environment becomes more challenging due to slowing economic growth momentum and tightening monetary conditions,” Fitch
Solutions said.
The think tank forecasts slower economic activity and waning growth momentum in the coming quarters owing to tighter monetary conditions.
Fitch Solutions also said the country’s deteriorating business environment— as evidenced in the Philippines’s slips in its ease of doing business ranking and corruption index—will do no good for the banks this year.
“Combined with rising interest rates both globally and domestically, as well as lower risk appetite, these factors will likely see investment slow over the coming quarters,” Fitch Solutions said.
BSP stand
FITCH Solutions’s stand on the banks’ exposure to the beleaguered Korean shipbuilder’s subsidiary in Subic Freeport echoed the sentiment of the Bangko Sentral ng Pilipinas (BSP).
Last week, BSP officials expressed their confidence in the five banks’ ability to handle the corporate restructuring while remaining compliant with their prudential regulations.
Hanjin workers
MEANWHILE, several companies in the energy and construction sector have already expressed interest in hiring the displaced workers of Hanjin Heavy Industries and Construction Co.-Philippines (HHIC-Phil) Inc., according to the Department of Labor and Employment (DOLE).
In a press conference on Tuesday, the DOLE’s Region 3 Director Zenaida A. Campita said firms in the economic zones in Clark, Bataan and Subic contacted them on the possibility of absorbing the remaining 3,812 Hanjin workers.
The employment offers were related to the construction of the New Clark City, as well as the building of power plants.
“We will be coming out with the list [of companies] next week after we conduct the profiling,” Campita told the BusinessMirror in an ambush interview.
The profiling of the remaining skeletal work force of HHIC-Phil will determine if they have the skills sought by potential employers.
Labor Secretary Silvestre H. Bello III had instructed DOLE’s Centrtal Luzon office to finish the profiling next week before he meets with other government agencies on employment opportunities for the displaced workers.
Among these agencies are the Departments of Trade and Industry, Transportation, and Public Works and Highways.
“We prefer they be employed here in the country first as we need their skills in welding, steel shipbuilding, construction and plant services for the ‘Build, Build, Build,‘” Bello said.
The remaining workers, who are employed by the Subic Shipbuilder Corp. (Sushicor), the general shipbuilding contractor of HHIC-Phil, are currently engaged in the construction of two more ships set to be completed by March.
“These workers may apply for retrenchment after their contract with Hanjin is completed,” Bello said.
Bello said Sushicor assured them the 3,812 workers will get a separation pay worth one month of their salary per year of service.
The highly skilled workers have an average pay range of from P800 to P1,000 per day.
Campita said they decided not to profile the 7,000 other workers of HHIC-Phil, who voluntarily agreed to be retrenched last month, since most of them already left for their home provinces in the Visayas and Mindanao.
The labor official, however, said they are still ready to provide employment opportunities to those who will approach DOLE Region 3.
Samuel P. Medenilla and Bianca Cuaresma