BSP forms task force to study scheme for PNB

The Bangko Sentral ng Pilipinas (BSP) has created a task force that will look into government’s plan to regain control of Philippine National Bank (PNB) by converting into equity the bank’s P25-billion indebtedness to the state.

The P25-billion in indebtedness consists of two loans — one for P15 billion from the BSP and another for P10 billion from the Philippine Deposit Insurance Corporation (PDIC) — which were issued last year after PNB suffered heavy withdrawals because of the delay of fresh capital infusion into the bank.

A BSP official said the task force’s study will be critical to PNB’s rehabilitation. The task force should be able to come up with something concrete by June so that the bank’s rehabilitation program can push through.

The same official said the task force’s findings will have to be consulted with tycoon Lucio Tan who owns 70 percent of PNB. Government’s stake is 16 percent.The task force will be composed of some members of the Cabinet, BSP Board member Melito Salazar and PDIC president Norberto Nazareno.

The government said earlier the World Bank and the International Monetary Fund had already given its nod to the "reverse privatization" plan for PNB.

This means government will drop its original plan of a joint sale of its remaining stake with Tan and convert PNB’s loan into equity that will raise government’s equity in the bank to over 51 percent.

BSP Governor Rafael Buenaventura said the WB and IMF are no longer opposing the plan for as long as government commits to go on with the privatization of the bank when it becomes profitable again.

At this point though, there are no serious offers to buy the government’s and Tan’s stake because of the bank’s financial condition.

PNB reported a net loss of P5.97 billion last year, although this was a significant improvement from its net loss of P13.85 billion in the previous year. The lower net loss was due to lower loan loss provisioning which was trimmed by 65 percent, lower operating expenses and higher service fees and other income from remittances of overseas contract workers.

Aside from its poor financial state which is turning off potential investors, PNB also has to deal with huge non-performing loans (NPL) which stood at 40 percent of total loans, or about P40.29 billion as of March this year.

Analysts said Tan and the government will be hard-pressed in selling their combined 86-percent stake in the bank since PNB’s book value has fallen to about P40 per share from an earlier price of P60 per share.

Moreover, PNB cannot implement its eight-year rehabilitation program. It was already approved in principle by the BSP but it is being reviewed and subjected to another due diligence by investment banks ING Barings and PriceWaterHousecoopers, with the latter asking for more time to finish its due diligence report. – Rocel Felix