PNB braces for tougher business environment
Bracing for a tougher operating environment amid the lingering coronavirus pandemic, tycoon Lucio Tan-led Philippine National Bank is raising credit loss buffer, liquidity ratios and loan collateral requirements while paring exposure to vulnerable sectors and reviewing operating costs.During the bank’s annual stockholders meeting yesterday, PNB president Jose Arnulfo Veloso estimated that the bank had less than 10-percent exposure to sectors vulnerable to the current pandemic.He said PNB was working to make sure its credit risks were mitigated and outstanding loans were serviced.
It has also adopted a stricter policy on granting new loans.
“We are conducting portfolio review to assess both industry-wide vulnerability and individual account resilience. To mitigate the risk in the bank’s portfolio, we will reduce exposure to vulnerable sectors and strengthen security positions. And for those that we can restructure, we will,” he said.On new loans, Veloso said PNB would focus on sectors with critical functions during the lockdown and those that thrive in the “new normal.”On the bank’s operations, he said: “a serious review of costs is going to be done and newer ways to generate revenues are going to be reviewed, specifically on areas where fees and commissions can be generated.”In the first quarter, PNB had set aside a larger credit loss buffer of P3.4 billion, compared to only P346 million in the same period last year.“The increase in provisioning is not reflective of the bank’s asset quality nor of its credit procedures but rather, it is an indication of the deterioration in the bank’s assessment of the macroeconomic outlook as a result of the impact of the global pandemic and the impact of the domestic lockdown,” PNB chief financial officer Nelson Reyes explained.
In determining the provisioning, PNB uses the expected credit loss methodology (ECL), which considers the effect of macroeconomic factors to probabilities of default.
“Recent macroeconomic forecast showed significant downside to the economy in the next six to 12 months. This has significantly affected the bank’s calculation on probabilities of default, resulting in higher ECL,” Reyes said.
“Management team has been keeping watch of liquidity ratios and early warning triggers on market liquidity and systemic risk,” he said.
Reyes said PNB had set internal targets on liquidity ratios to ensure that the bank would have sufficient buffer in case the current crisis would worsen. —Doris Dumlao-Abadilla INQ
