MANILA, Philippines (Update 2, 3:34 p.m.) — Financial stocks took a hit Friday after five of the country’s largest banks were reportedly exposed to what could be the biggest corporate default in Philippine history.
The Philippine unit of South Korean shipbuilder Hanjin early this week filed for court rehabilitation proceedings as it struggles to pay $412 million in combined loans from five Philippine banks. Most of the money was reportedly lent without collateral protection.
The local banks involved were Rizal Commercial Banking Corp.; Land Bank of the Philippines; Metropolitan Bank and Trust Co.; Bank of the Philippine Islands, and Banco de Oro Universal Bank, the Philippine Daily Inquirer reported Friday.
On Friday, the Philippine Stock Exchange Financials Sector Index was down 2.54 percent or 46.10 points to close at 1,772.32. Meanwhile, the main index slipped 1.02 percent or 81.14 points to end at 7,904.09.
Shares in BDO, the nation’s biggest bank in terms of assets, ended flat while shares in RCBC, Metrobank, and BPI tumbled 9.12 percent, 4.82 percent and 4.76 percent, respectively, by closing bell.
State-run LandBank is not listed on the stock exchange.
“With the US still in shutdown and a huge default affecting the banking industry, PH investors took money out as the index neared the 8,000 level,” Luis Limlingan of Manila-based brokerage firm Regina Capital Development Corp. said in a market commentary.
“Some obvious headwinds preventing us from cracking well past 8,000 - financials getting hit as five of the largest PH banks are firefighting the biggest corporate default in the country's history,” Limlingan added.
The Inquirer reported that the banks have agreed that no one will unilaterally seize the shipbuilding giant’s assets to protect the country’s banking system and economy. The lenders are also reportedly considering talking to strategic investors.
For its part, the Bangko Sentral ng Pilipinas said the default was “no cause for worry,” adding that Hanjin’s outstanding debts only account for 0.24 percent of the total gross loans of the Philippine banking system, and 2.48 percent of foreign currency loans granted by local lenders. — Ian Nicolas Cigaral