banking finance

Finance chief sees '20 deficit to be around P1-T

May 15, 2020

GOVERNMENT expenditures for coronavirus disease 2019 (Covid-19) is expected to increase the budget deficit to around PHP1 trillion this 2020.     This was disclosed by Finance Secretary Carlos Dominguez III Wednesday but assured the public that the government was in a good financial position even before the pandemic hit.     The inter-agency Development Budget Coordination Committee (DBCC) has set a 3.2-percent budget deficit cap for this year amounting to PHP677.6 billion.     Dominguez said there are lots of numbers that economic managers are currently looking at, but cited “the first number you have to figure out (is) what exactly is going to be our deficit for the year.”     “And our estimate is about a trillion pesos, around a trillion,” he said.     Dominguez said the government’s four-pillar Covid-19 response is being funded by the tax collections, the dividends from government-owned and controlled corporations (GOCCs), and loans, among others.     He said that although collections of taxes have been delayed due to postponement of filing of income tax returns (ITR) and other related documents because of the quarantine period, the government will still be able to collect these.     He added the government was able to receive record-high PHP120 billion dividends from GOCCs, and this will be a plus for the Covid-19 response program.     The government has signed several loan agreements with the Asian Development Bank (ADB) and the World Bank (WB), among others.     These include the loan pact with ADB that allows the Duterte government to access up to USD1.5 billion in budgetary support for Covid-19 programs and the USD100-million loan from the WB.     Dominguez said they are also in discussions with the governments of Japan, Korea, China, and France for “project-based bilateral financing.”     He declined to give specifics on where the government’s Covid-19 response financing currently is since they are still awaiting the reports until end-April, but vowed to disclose this once the data is available.     “We are exactly where we want to be,” he added.     Meanwhile, Dominguez said Finance officials “are willing to look” at the Corporate Income Tax and Incentives Rationalization Act (CITIRA) that Senators plan to pass to help companies recover from the economic impact of the global pandemic.     CITIRA is part of the government’s tax reform program that aims to correct the country’s tax system.     Dominguez earlier said Senate Bill No. 1357, or the CITIRA, targets to make incentives given to companies more targeted, which will allow the country to be more competitive in the region.     If this bill is approved this year, the special tax rate on gross income will be increased immediately this year from the present five percent to eight percent then to nine percent next year, and to 10 percent by 2022.     On Wednesday, Dominguez said they are “willing to look at it (CITIRA) and most likely cut it further more quickly than originally planned.” (PNA)

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PH banking system resilient vs. impact of health crisis

May 15, 2020

REFORMS instituted in the past serve as buffers for the Philippine banking system vis-à-vis the impact of the global pandemic caused by the coronavirus disease 2019 (Covid-19), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said.     In a briefing aired over the central bank’s Facebook page Thursday, Diokno said the domestic banking system and the Philippine economy in general is facing the pandemic “from a position of strength.”     He said the domestic financial system is the country’s first line of defense against the pandemic, and the banking industry is up for this task since it remains adequately capitalized with total banking assets accounting for 81.7 percent of the financial system’s resources as of last February.     “Reforms have been put in place to maintain sufficient buffers in times of crisis and ensure business continuity to serve financial consumers and to keep the economy going,” he said.     The sector’s overall loan quality “was satisfactory”, with a non-performing loan (NPL) ratio of 2.1 percent, he said.     Deposits remain the banks’ main funding source with a share of 85.2 percent of the total.     Capital adequacy ratio (CAR), a gauge of banks’ financial strength, of universal and commercial banks (U/KBs), stood at 15.4 percent on a solo basis, and 16 percent on consolidated basis as of end-2019.     These are higher than BSP’s 10-percent minimum threshold and Bank of International Settlements’ (BIS) 8-percent minimum requirement.     Total portfolio grew by 10.2 percent year-on-year as of last February.     “I believe the banking system is now benefiting from prudential reforms carried out during the last 20 years. Moving forward, the BSP will continue to pursue proactive measures aimed at further strengthening the banking system,” Diokno said. (PNA)

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Bank lending expands faster in March

May 15, 2020

OUTSTANDING LOANS disbursed by universal and commercial banks rose by 12.9% in March, faster than the downward-revised 12% pace in February, according to data from the Bangko Sentral ng Pilipinas (BSP).     Inclusive of reverse repurchase agreements, lending rose by 14%, quicker than the upward-revised 11.3% logged in the prior month.     Data showed the rise in production loans, which made up 87.6% of the total credit, continued to be the main driver of growth. Lending to the sector grew quicker at a pace of 12% from the 9.4% seen in February.     The sustained increase in production loans is attributable to an increase in credit for real estate activities (21.8%); information and communication (20.8%); financial and insurance activities (17.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (6.8%); and electricity, gas, steam and air-conditioning supply (7.7%).     Other sectors also saw rise in loans except for manufacturing (-0.4%) and mining and quarrying (-5.3%), the BSP said.     On the other hand, growth of loans disbursed for households eased to 22.9% from the upward-revised 37.7% logged in February. This was mainly due to the slower expansion in credit card and motor vehicle loans during the month.     UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the pickup in lending to the market’s reaction after the easing moves done by the central bank since 2019.     “Since last year, we know that the BSP has been on an easing stance. RRP (reverse repurchase rate) cuts were made including other liquidity measures such as the RRR reduction. The market has been responding and liquidity in the market has been ample and growing,” Mr. Asuncion said in an e-mail.     In 2019, the BSP slashed rates by a total of 75 basis points (bps) before opting for a pause. By yearend, the overnight reverse repurchase rate was at four percent while lending and deposit rates were at 4.5% and 3.5%, respectively.     Meanwhile, reserve requirement ratios (RRR) were slashed by a total of 400 bps last year, which reduced the RRR of big banks as well as thrift and rural banks to 14%, four percent, and three percent as of end-2019.     BSP Governor Benjamin E. Diokno has said monetary policy tends to work with a lag of about three to nine months.     For this year, the BSP has been aggressive as it seeks to curtail the impact of the virus on the economy. It has cut rates by a total of 125 bps thus far which reduced overnight reverse repurchase, deposit and lending rates to record lows of 2.75%, 3.25% and 2.25%, respectively.     The BSP has likewise reduced RRR of universal and commercial banks by another 200 bps to 12%.     In the coming months, the lockdown measures may dent lending growth, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.     “Bank loans could start to slow down in April and May 2020 and could even potentially contract in Q2 2020 together with the broader economy, depending on how long the lockdown would last,” Mr. Ricafort said.

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PCCI asks financial institutions to extend loan maturity for biz

May 12, 2020

THE country’s largest business organization, the Philippine Chamber of Commerce and Industry (PCCI), is asking banks and other financial institutions to extend loan maturity for enterprises for at least one year for them to be able to recover from the impact of the community quarantine due to the coronavirus disease 2019 (Covid-19) outbreak.     In a statement Monday, PCCI said the extension should include loans due between March 16, 2020 to December 31, 2020.     PCCI President Benedicto Yujuico said the business group’s members have a growing concern on their “deteriorating cash positions and diminishing ability to avoid massive lay-offs” as most businesses are closed during the enhanced community quarantine (ECQ) that started in mid-March.     “The ECQ has brought substantially all businesses to a sudden and unexpected stop. Many are now facing economic distress, forcing them to resort to drastic cost-cutting, lay-offs, and pay cuts.  Even as the government slowly relaxes the quarantine measures, we expect that the effects of this crisis will continue to be felt and that businesses will continue to struggle through the end of 2020,” Yujuico said.     He added a loan extension for at least a year will go a long way to preserve employment and averting permanent closure of businesses, which are clients and partners of banks and the non-bank financial institutions (NBFIs).     “Without the support of Philippine banks and other NBFIs, many businesses will likely be forced to shut down,” the PCCI chief added.     Metro Manila, Central Luzon, and Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) regions, where a large percentage of businesses are located, have been placed under ECQ for two months. (PNA)

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GSIS grants P4B in loan aid to gov’t workers, pensioners

May 12, 2020

THE Government Service Insurance System (GSIS) has released a total of P4.1 billion in loans to some 60,000 government workers and pensioners nationwide as of April 30.      This was reported Monday by Rolando Ledesma Macasaet, president and general manager of the state pension fund.     While most parts of the country are still in enhanced community quarantine (ECQ), GSIS was able to disburse P3.48 billion in various loans (conso-loan, policy loan and pension loan) to a total of 25,198 GSIS members and pensioners nationwide between the period March 27 and April 30.     In addition to these regular loan programs, the state pension fund opened the coronavirus disease 2019 (Covid-19) emergency loan program to its 2.1 million members and pensioners last April 13.     “I am very proud to say that in just 17 days, from April 13 to April 30, GSIS has granted PHP664 million in emergency loan to some 33,000 borrowers nationwide,” Macasaet said.     Earlier this month, this loan program was enhanced to make it more responsive to the needs of GSIS members and pensioners.     Under the enhanced program, Macasaet said members who have in-default loan accounts with arrears of more than six months are now allowed to renew their emergency loan.       “We have also reduced the paid premium requirement from six months to only three months,” he said. “However, since this is the first time for GSIS to offer the emergency loan on a national scale, there may be some delays due to systems maintenance activities. I am grateful for the patience and understanding of our stakeholders during this time.”      Considering that systems enhancements are still in progress, members and pensioners whose emergency loans were renewed and granted from April 13 to 30 may renew their loans starting 11 May 2020. (PR)

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PHL banks to see credit losses due to coronavirus pandemic

May 12, 2020

PHILIPPINE BANKS may see loan losses of up to P100 billion in 2020 due to the financial impact of the coronavirus disease 2019 (COVID-19), according to S&P Global Ratings.     “For full year 2020, we estimate credit losses to rise threefold, by P100 billion, equal to 1.3% of banking sector loans,” it said in a report on Wednesday.     This year, banks will witness low single-digit growth, rising bad loans and credit costs and lower profitability as the country could go into recession due to the pandemic, S&P said.     “The effect on individual banks in the coming quarters will be uneven, largely hinging on whether lenders adopt relaxed accounting and provisioning standards,” S&P Global Ratings credit analyst Nikita Anand said.     The report said loan demand may be buoyed by the corporate sector which needs a liquidity boost during this period.     Amid the current situation, the asset quality of banks will be dependent on the performance of the corporate sector as it accounts for 82% of their total loan portfolio.     “Large conglomerates with their strong business profiles, diversified revenue streams and solid liquidity buffers will likely come through the challenging operating conditions intact,” S&P said.     “Micro, small, and midsize enterprises (7% of the banking sector’s books) and leveraged corporates may face challenges,” it added.     S&P also flagged that lenders’ exposure to sectors like hotels and catering (2% of bank lending), wholesale and retail trade (12%), transportation (3%) and manufacturing (10%) will be particularly high risk. Credit cards and unsecured personal loans from the retail segment are also likely to see higher default rates, it added.     “Secured retail loans such as mortgages and auto loans will not likely be in the first wave of nonperforming assets, but will see some stress as unemployment rises,” S&P said.     The firm noted that the country’s local banks are equipped with “good financial buffers and are entering the crisis “from a position of strength,” thanks to a 14% Tier 1 industry ratio and higher loan loss provisioning, which is seen to help mitigate rising risks in their operating environment.     The Bangko Sentral ng Pilipinas has already implemented an array of regulatory relief measures for the banking industry amid this crisis, including the staggered booking of allowance for credit losses, ditching penalties on legal reserve deficiencies and expanding the single borrower’s limit, among others.     Earlier this week, the central bank has also allowed banks to tap the excess capital from their Basel-III mandated buffers to mitigate the impact of the situation on their operations.

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