Banks see lower loans, more bad debt on virus

BANKS HAVE NOW activated their business continuity plans (BCP) and are allowing flexible work arrangements as they brace for the impact of the coronavirus disease 2019 (COVID-19).

Some lenders also assessed the impact of the outbreak on their performance, including lower loan bookings and the rise of bad loans.

“A reduction in new loan bookings by 20% compared to the previous year is possible. Nonperforming loans (NPL) may double by December 2020 compared to the previous year’s,” AUB said in a filing on Monday.

Aside from this, the bank also said borrowing costs may inch up by 25 basis points (bps).

China Banking Corp. also expects an increase in bad loans due to the impact of the outbreak on some industries, but assured they have enough capital buffers to weather the rise in soured debt.

“The bank’s nonperforming loans could see an uptick but we have sufficient provisions and capital buffer to absorb impact of credit quality deterioration,” it said in a statement.

Earlier, credit raters warned of a possible rise in bad loans due to the virus, with its intensity largely depending on the duration of the outbreak.

For its part, Philippine Bank of Communications said they are assessing the potential impact of their exposure to businesses related to tourism, travel and social activities-dependent businesses such as restaurants and cafés, which analysts have identified as sectors that will bear most of the brunt.

“As of this writing, less than 10% of our Corporate portfolio are dependent on these industries and none has recorded any delay in its payment obligations. Similarly, the bank has not recorded any COVID-19 related past due for its Consumer loan portfolio,” PBCom said.

Meanwhile, Rizal Commercial Banking Corp. said they are undergoing a stress exercise to look into the impact of the outbreak to their whole portfolio.

It added that it has existing policies meant for consumers and businesses that will be hit by the spillovers of the outbreak.

“The bank has identified potential affected businesses as well as consumers who might be affected by the crisis, and has existing policies in place that would allow granting of financial assistance (way of suspension of payments, adjustments in due dates, to all affected customers),” it said in a statement.

On the other hand, Security Bank Corp. said it is still “too early to evaluate” the repercussions of the pandemic to their operational and financial performance.

“However, we have put together all our resources to vigilantly monitor the rapidly changing environment, and we are constantly reassessing as government [directives] are updated,” Security Bank said.

With Metro Manila placed under a lockdown to prevent the further spread of the virus, banks have been employing measures to continue their services and safeguard both workers and clients from possible contagion.

The country’s largest bank, BDO Unibank, Inc. said they have activated their BCP and assured that their branches and offices are “business as usual” despite the community quarantine in Manila.

“The Bank’s BCP has back-up sites for critical functions such as client servicing, trading and treasury, operations and information technology, while key personnel have also been identified to man both critical and non-critical units to ensure banking operations continue even in the event of a severe business disruption,” the bank said in a statement on Monday.

BCPs have been required for lenders by the Bangko Sentral ng Pilipinas (BSP) to ensure sufficient financial and human resources in times of unforeseen events that could cause business disruption.

Meanwhile, the Chamber of Thrift Banks (CTB) said they have been asking for shorter operating hours amid the outbreak.

“We have also requested the BSP to allow shortened banking hours and banking days, with the best interest of the public in mind,” it said in a statement.

Moreover, CTB said they are backing the central bank’s call for the public to utilize e-banking and digital payments for accessibility and convenience at these times.

Metropolitan Bank & Trust Co. said they have implemented an Emergency and Disaster Response Plan for Infectious Disease that is being followed in their branches and offices to make sure there are precautionary measures and sanitation practices.

“This includes intensified efforts to improve hygiene and sanitation at the workplace with more frequent disinfection of common areas, distribution of alcohol supplies, and other initiatives,” it said in a statement.

Meanwhile, employees of its thrift unit, Philippine Savings Bank will be given option for flexible working hours, allowing them to start their eight-hour shift from 7:30 to 8:30 to get away from crowded hours in the city.

For its part, Bank of the Philippine Islands said they have imposed travel bans, remote work arrangements, and reduced in-person meetings to prevent contagion.

UnionBank of the Philippines, Inc. has likewise gone for split-workforce arrangements “that involve telecommuting and working from home strategies.”

Confirmed cases of COVID-19 in the Philippines have breached 100, with casualties rising to 12 as of press time. — L.W.T. Noble