Friday, October 24, 2008 Pinoys should brace for pain
THE worst is yet to come.
WHILE banking executives in the country agree that the Philippine banking system is relatively sound, they say the financial turmoil triggered by the sub-prime mortgage crisis in the United States has yet to run its course, so the Philippines cannot escape feeling its effects.
“The Philippine banking industry is healthy. We were not really affected significantly by the sub-prime crisis,” said Omar Byron Mier, president and chief executive officer of Philippine National Bank (PNB), Wednesday on the sidelines of the launching of the Mabuhay Miles Platinum Mastercard at Casino Español.
“We have to recognize that the central bank did a good job in supervising the banks,” he said.
The combined exposure of Philippine banks to investment bank Lehman Brothers and insurance giant American International Group—casualties of the US sub-prime mortgage crisis—is less than one percent of the total resources of the Philippine banking system.
But he said the crisis is going to have an impact on the remittance business.
“We’ve seen the frequency of remittances now less. The amount is also getting smaller,” he said.
Speaking about the overall remittances of overseas Filipino workers (OFW) to Philippine banks, he said: “Before, the growth per month was 18 percent. But now (starting August), it’s 10 to 11 percent.”
The United States is the top source of total OFW remittances to the Philippines, accounting for 30-35 percent of remittances, followed by the Middle East, Europe and Asia, Mier said.
Among all Philippine banks, PNB has the largest number of remittance branches outside the country, he said, a position it expects to maintain after its legal merger with Allied Bank, which is expected to take place not later than Jan. 1, 2009.
At the same event, Allied Bank president Reynaldo Maclang told Sun.Star Cebu that Filipinos may not feel the pain right now, “but later, we might be affected (because) if there is retrenchment in the United States, they (OFWs) can’t remit.”
Exporters could also feel the pinch if buyers in the United States don’t make orders, he said.
Credit card
“What we’re feeling now is the sub-prime crisis,” Mier said. We haven’t yet felt the impact of the credit card crisis and the crisis in the real economy in different industries. We’ll feel that next year.”
He said US banks have yet to make more write-downs, for credit card defaults.
Even now, the Philippine government is already projecting economic growth to slow to 3.5 to four percent for 2009, which he did not look upon as a good sign.
“With the Philippine population growth at 2.5 percent, you must have double that, like 5-6 percent (economic growth), which we did last year,” he said.
Asked last Tuesday to comment on the capability of the country to deal with the financial crisis, RCBC president and chief executive officer Lorenzo Tan said: “It’s hard to speculate on the unknown. In business school, they teach you, ‘You cannot quantify fear.’”
But he said what was certain was that the crisis today is definitely worse than the Asian financial crisis of 1997-1998.
Injecting a note of optimism, Prudencio Gesta, RCBC first vice president/regional sales manager for the Visayas Region, said “banks that survived in 1997 are fully capable” of surviving this crisis because the central bank instituted reforms like requiring a higher capital adequacy ratio after the Asian turmoil.
