Hanjin bankruptcy poses headwind for PSE’s Financials sector

The Philippine stock market is facing strong headwinds that may seriously hit the Financials Sector as five of the biggest banks are exposed to the what may well be the largest corporate default in Philippine banking history, a stock brokerage said Friday.

Subic Bay Metropolitan Authority (SBMA) Chairperson Wilma Eisma revealed on Thursday that Hanjin Heavy Industries and Construction Philippines has filed for a voluntary rehabilitation due to ballooning financial obligations to Philippine and Korean lenders.

“Some local headwinds … may prevent us from cracking well past 8,000 …” said Luis Limlingan, head of sales at stock brokerage Regina Capital and Development Corp., noting the Hanjin situation may overwhelm the positive sentiment from Wall Street.

“Financials may get hit as five of the largest Philippine banks are firefighting the biggest corporate default in the country’s history, an exposure of $412 million, after the local shipbuilding unit of Korean conglomerate Hanjin recently declared bankruptcy,” Limlingan noted.

As of 11:09 a.m., the Financial’s index was down 54.74 points or 3.01 percent at 1,763.68. The benchmark PSEi was down 52.90 points or 0.66 percent at 7,932.33, and the broader All Shares was down 23.42 points or 0.49 percent at 4,741.49.

The Philippine banks involved are Land Bank of the Philippines, Bank of the Philippine Islands, Banco de Oro Universal Bank, Rizal Commercial Banking Corp. (RCBC), and Metropolitan Bank and Trust Co., according to industry sources.

In a separate statemen sent to GMA News Online,  RCBC dismissed the severity of the situation. “The amount involved is very manageable and the borrowing company’s business is actually very attractive with a lot of potential,” the bank said.

“With the 5 creditor-banks working together and looking for an investor as one option, the matter’s resolution is just a matter of time and we expect that to be sooner than later,” RCBC added.

The Bangko Sentral ng Pilipinas (BSP) noted in another statement it is in coordination with the banks involved, and that an alarmist attitude in unwarranted at this point.

“Yes, BSP is closely coordinating with creditor banks on this matter,” said Deputy Governor Chuchi Fonacier.

BDO Unibank noted its financial exposure to Hanjin Philippines is insignificant and adequately covered.

“We have an exposure to Hanjin and we are more than adequately provided for potential losses,” BDO president Nestor V. Tan said.

“There’s no cause for alarm. Hanjin loans to the banks are only a tiny fraction of the total loans of the Philippine banking system. And these creditor banks are well capitalized to absorb possible losses. And they have taken action and/or will continue to take action to protect their position,” Fonacier said. —with Ted Cordero/VDS, GMA News