BAP says banks can stand risks from ABS-CBN loans

THE BANKING INDUSTRY can weather possible credit risks from their exposure to ABS-CBN Corp. following the network’s denied franchise renewal on the back of their strong capitalization and liquidity levels.

“The Bankers Association of the Philippines (BAP) expresses its confidence in the capacity of banks to manage their credit portfolio in relation to the non-renewal of the ABS-CBN broadcast franchise,” BAP said in a statement on Tuesday.

The group’s statement came days after the House of Representatives’ Committee on Legislative Franchises on Friday voted to deny a 25-year franchise to the Lopez-led network.

Critics have warned of risks from the legislative move, including the uncertainty of the jobs of more than 11,000 ABS-CBN workers. Meanwhile, some analysts have said the decision could threaten foreign direct investments and market sentiment on the country’s business landscape.

“In the midst of today’s pandemic and concerns on the non-renewal of the ABS-CBN broadcast franchise, we strongly believe that banks will continue to be steadfast as they are supported by strong financial conditions, robust risk management systems and a good corporate governance,” BAP said.

In its statement, BAP said prudential measures by the Bangko Sentral ng Pilipinas has made banks “strong and healthy” through the years amid various crises.

“Most importantly, we are confident that our member banks are prudent and take the welfare of their depositors at paramount importance,” it said.

The central bank expects a slight uptick in soured loans amid the pandemic, but has assured this will be more manageable than the aftermath of the Asian Financial Crisis, when the industry’s bad loan ratio peaked at 17.6% in 2002.

The banking industry’s capital ratio was at 15.4% on a stand-alone basis and 16% on a consolidated basis as of end-2019. Both are beyond the 10% minimum requirement set by the central bank.

In May, big banks’ nonperforming loan ratio stood at 2.43%, just slightly higher than the 2.31% in April.

Banks have increased loan provisions to prepare for the impact of the pandemic. Bank allowances for credit losses rose 26.7% year on year to P253.4 billion in May.

“The banking industry remains strongly capitalized and in solid liquidity position to manage credit risks,” BAP said. — LWTN