S&P: ‘Long road to recovery’ for PHL banks By Bianca Cuaresma @BcuaresmaBM
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HE local banking system’s financial performance is not expected to “return back to normal”in the next two years, as bad loans are expected to start rising in the first quarter of 2021, an international credit watcher said. In a recent assessment on the Philippine banking sector, S&P Global Ratings said they expect non-performing loans to “jump” in the first three months of this year as loan moratoriums and fiscal support are phased out. In particular, S&P forecasts NPLs to hit 6 percent of the local banking system’s total loan portfolio in 2021, almost double the 3.6-percent NPL ratio seen at the end of 2020. NPL are also known as soured loans as these are credits that remain unpaid
90 days after their due date while NPL coverage ratio is the amount of provisions banks set aside to cover for unpaid loans so their balance sheets and operations won’t be gravely affected by the consumers’ inability to pay. “Philippine banks are on a long road to recovery. Asset quality will deteriorate further in the coming quarters as banks recognize the full brunt of Covid-19 on borrowers,” S&P Global Ratings credit analyst Nikita Anand said. Meanwhile, S&P said credit cost, a measure of provisioning for bad loans, is likely to stay elevated at 1.5 percent to 1.8 percent in 2021. On a positive note, Anand said they expect sector-wide profits to improve slightly in 2021, with return on assets increasing to 1 percent on the back of relatively better growth and lower credit costs in 2021.
High provisioning in 2020 and capital buffers is also expected to help banks maintain credit standing, Anand said, as they repair financial metrics, assuming the economic revival stays on track. According to S&P assessment, Philippine banks are likely to benefit from reviving economic activity and progress in vaccination rollouts. “Relaxation of restrictions in Manila will support stronger activity in the second half,” S&P said.
Strong downside risks
Amid early signs of revival, S&P said vaccination will be key for a sustaining trend. “S&P Global Ratings does not expect the country’s banks to reach pre-pandemic financial performance until 2023. Our negative outlook on rated banks reflects our view that financial buffers could not absorb the rapid deteriora-
tion in asset quality likely to ensue if the recovery is derailed,” Anand said. “The emergence of yet more contagious Covid-19 variants with the potential to evade vaccine-derived immunity presents a major risk to normalization,” the credit analyst said. In a recent survey conducted by the Bangko Sentral ng Pilipinas (BSP), however, local banks said they believe they are well-equipped to handle the economic fallout of movement and operational restrictions due to the pandemic, as they continue to have adequate loan loss provisions, capital and liquidity. About 44.3 percent of banks in the country said they project their NPL coverage ratio of between 51 and 100 percent while 48.9 percent said their NPL coverage ratio will likely be less than or equal to 25 to 50 percent of total NPLs.
BOC PUT ON ALERT FOR PORK IMPORTS FRAUD w
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Tuesday, February 23, 2021 Vol. 16 No. 135
P25.00 nationwide | 2 sections 18 pages |
RECONCILE DATA ON PORK IMPORTS, ASF DAMAGE, D.A. TOLD By Butch Fernandez
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Clouds loom over the Pililla wind farm, one of the famous tourist attractions in Rizal, but which has been closed to the public since the Covid-19 lockdowns. A survey unveiled by tourism officials showed inconvenience and budget constraints, both tied with health protocols like testing and paper requirements, were the key factors behind the reluctance of Filipino travelers to make long-distance trips despite a push back to normal. Story at bottom of page. BERNARD TESTA By Bernadette D. Nicolas @BNicolasBM & Manuel T. Cayon @awimailbox
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Mindanao Bureau Chief
HE Department of Finance (DOF) has ordered Bureau of Customs (BOC) to tighten its watch on pork importers trying to misdeclare or misclassify shipments to avoid correct payment of tariffs as the country reels from a pork supply shortfall that resulted in the spike in pork prices.
Finance Secretary Carlos G. Dominguez III issued the order after President Duterte approved in principle during the February 3 Cabinet meeting the Department of Agriculture’s recommendation to expand the minimum access volume (MAV) allocation for pork imports. “Please take a close look at the potential smuggling of pork,” Dominguez told Customs Commissioner Rey Leonardo Guerrero during a recent DOF Executive Com-
mittee (Execom) meeting. “Some pork importers may resort to technical smuggling,” Dominguez added. Misdeclaration refers to a fa l se, u nt r ut hf u l, er roneou s or inaccurate declaration as to quantity, quality, description, weight, or measurement of goods resulting in deficiency between the duty and tax that should have been paid and the duty and tax actually paid. See “BOC,” A2
Convenience, costs stymie long-route travels By Ma. Stella F. Arnaldo
@akosistellaBM Special to the BusinessMirror
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ILIPINOS are sticking closer to home, when traveling, out of convenience and cost considerations. Undersecretary Benito C. Beng-
zon Jr., spokesman for the Department of Tourism (DOT), citing a recent travel survey said, Filipinos are doing so, “first, because of cost considerations. You have lower costs if you just ride a car, your family is with you, you’ll drive two hours/three hours from Metro Manila.” He was speaking at a re-
PESO exchange rates n US 48.4400
cent virtual presser on “Recharge Philippines” with the Task Group on Economic Recovery, hosted by Malacañang’s communications group. Another reason is, “depending on the destination, maybe these don’t have RT-PCR test requirements, unlike the other destina-
tions that have reopened, there are such requirements. So basically it’s out of convenience, and cost considerations. Once their confidence returns, and we’re seeing it now in many of our destinations, they will travel farther and farther,” he said in Filipino.
@butchfBM
ENATORS on Monday resolved to ask the Department of Agriculture (DA) and the Bureau of Customs (BOC) to sit down and discuss their respective data on the costs of imported meat. The senators questioned the basis of a pending recommendation to cut tariffs and increase the minimum access volume (MAV) for pork. Currently, the MAV for pork is pegged at 54,210 metric tons (MT). The MAV Advisory Council has proposed to raise this to 400,000 MT under the MAV Plus scheme to plug the supply gap. Pork imported within MAV and outside of MAV is slapped a tariff of 30 percent and 40 percent, respectively. The DA wants to lower the tariff for pork within MAV to 5 percent for the first six months and then raise it to 10 percent for six months. For outMAV pork, the DA recommended to cut the tariff to 15 percent for the first 6 months then increase it to 20 percent thereafter. At the same time, senators resolved to get a report reconciling data on the actual damage due to African swine fever (ASF) and measures that are being taken to mitigate the problem in 2021. See related story on page A5, “DA chief bares P740-million swine ‘repopulation’ program.” Warning that reducing tariff could unduly favor importers and hasten the collapse of the local hog industry, the Senate Committee on Agriculture approved a motion by Sen. Imee Marcos “to require that DA and BOC make a data analysis of the true cost of imported meat,” with the assumption that there is “no increase in MAV” and “no increase in tariffs.” Committee Chairman Sen. Cynthia Villar said the two agencies should go back to the Senate and explain the troubling variances in the data they
have, after Sen. Francis Pangilinan stressed the need for a “separate discussion between DA and BOC on price variances.” Pangilinan demanded to know why Customs data of the cost of imported pork, as submitted to Villar’s committee, was $1.65 a kilo, but the DA projected a cost of $3 when it endorsed the increase in importations in a bid to stabilize local prices, which surged from a combination of the onslaught of ASF and the series of storms in the last quarter of 2020. A testy exchange ensued between Pangilinan and Agriculture Secretary William D. Dar when the DA chief explained that the data attributed to DA were the result of simulations, even as Pangilinan insisted that when the government quotes its buying price at a high of $3, it “sends signals to the market” which in turn will jack up its prices. The senator had previously recalled the lesson from past years, when successive Philippine moves to import rice jacked up the global prices to historic highs. Dar told Pangilinan, “I don’t understand your logic,” and insisted theywerenotsignalingthemarket. Pangilinan said he simply wanted an explanation of why DA projected the prices of imports at $3 when “$1.65 was declared [by importers] to BOC.” Told by an assistant secretary that the $1.65 was the actual cost declared to BOC in January 2020 and prices have since risen to a high of $2.65, Pangilinan then demandedtoknow,“thenwhydidyouquote $3 instead of $2.65? Why are you increasingthevalueofimports”and asserted that this was tantamount to “favoring importers.” DA’s head of the Policy Research Service Noel Padre explained to the Senate panel that “we had a range” of values in the simulation, inputting both the actual 2020 values and the new rates. “We included the BOC data,” and their range came up to between $218 and $298. Continued on A5
Continued on A2
n japan 0.4596 n UK 67.9226 n HK 6.2476 n CHINA 7.4987 n singapore 36.6027 n australia 36.1223 n EU 58.7093 n SAUDI arabia 12.9170
Source: BSP (February 22, 2021)