PNB expects better Q3 results

MANILA, Philippines — Philippine National Bank (PNB) performed better in the third quarter on lower provisioning for bad loans as the economy started to recover after containment measures to prevent the spread of the coronavirus were lifted.

In a virtual press conference, PNB president and chief executive officer Jose Arnulfo Veloso said the Lucio Tan-led bank has seen improvements in the third quarter.

“The third quarter has already demonstrated an improvement in terms of the economic forecasts and therefore the provisioning is actually decreasing,” Veloso said.

Earnings of the country’s fifth largest lender fell 65 percent to P2.58 billion in the first semester from P3.97 billion in the same period last year as provision for impairment, credit and other losses went up to P8.44 billion from only P808.82 million last year.

Veloso said the provision for bad loans reached P9 billion as of end-August.

“We also took a proactive approach in our provisioning to protect our balance sheet against potential credit losses,” he said.

The bank identified potential sources of liquidity risk and established early warning indicators before COVID-19 affected the country.

“This allowed the bank to address potential weaknesses and build buffers to ensure that the bank stay resilient. Transparency is key in managing trust and confidence,” Veloso said.

Credit watchdogs S&P Global Ratings and Fitch Ratings earlier raised red flags over the potential impact on Philippine banks as deeper economic contraction could impair the industry’s profitability, asset quality and capitalization.

Nelson Reyes, chief finance officer at PNB, said the provisions made were based on the macroeconomic forecasts in the first half when the Philippines imposed the world’s longest and strictest lockdown.

“I agree that the provisioning levels should be better this quarter on the basis of better economic forecasts. I think the economic forecast for the third quarter are a lot better than what the factors that we used during the first half because it was really very uncertain,” Reyes said.

Reyes added the provisioning for the third quarter was lower than the P5.08 billion booked in the second quarter.

The excess provision for soured loans, officials explained, could be called back and be part of the bank’s net income if economic conditions further improve resulting to lower non-performing loans.

“But that P9 billion worth of provisions is something that if the trend in terms of economic numbers continue to improve, can be called back and therefore be part of net income,” Veloso said.

On the planned asset sale, Veloso said the bank expects to liquidate low earning assets including prime real estate properties within the year.

PNB earlier transferred P46.7 billion worth of low earning assets including prime real estate properties to wholly owned PNB Holdings Corp. in exchange for more shares.

Last Sept. 10, the PNB board approved a plan to realize the market value of its prime properties and reduce its low-earning assets to strengthen its financial position.

“The amount of real estate that we have in the bank should be allowed to be earning assets. That is a priority because once we are able to do that it will allow us to decrease the amount of risk weight assets to make PNB lend more and be able to do more business.

PNB is awaiting the green light from the Securities and Exchange Commission on the additional subscription to 466.77 million shares of PNB Holdings with a par value of P100 per share out of an increase in authorized capital.

“If we are able to get regulatory approvals soon, then we are hopeful that this is a transaction that will materialize within the year,” Veloso said

PNB is currently undertaking an inventory of its prime properties including the 10-hectare PNB Financial Center along Macapagal Boulevard in Pasay City, office buildings in the central business district in Makati City as well as the foreclosed eight-hectare property from Department of Information and Communications Technology Undersecretary Ramon Jacinto.

It announced in 2018 that it was planning to put up a state-of-the-art and world-class 60-story building that would serve as the bank’s new headquarters.