Financial sector reckons losses from floods

AS the government clears the debris generated by Typhoon Ondoy, the Philippines’ financial sector is beginning to see the extent of the damage on their balance sheet.

The Bangko Sentral ng Pilipinas (BSP) said banks have to restructure P5-billion worth of loans mostly extended to small businesses and individuals in typhoon-affected areas.

This is equivalent to one percent of the P500-billion worth of banks’ retail loan exposure in the calamity areas. This exposure is roughly 24 percent of the industry’s P2.3 trillion total loan portfolio.

“Vulnerable are individual loans as well as loans to small companies and agricultural lending. The big loans are not significantly affected. We are particularly concerned about the loans to individuals, retail lending,” BSP Deputy Governor Nestor Espenilla Jr. said on the sidelines of the Rural Bankers Association of the Philippines (RBAP) 52nd charter anniversary.

“One percent is a reasonable estimate,” he said, referring to problematic loans.

Compared with past disasters, the scale of the losses is large as the affected areas are in the country’s National Capital Region (NCR), which accounts for the biggest share of the country’s economy, the BSP official said.

“The areas hard hit are the mass of the GDP,” he said, referring to the country’s gross domestic product, which is the value of final goods and services produced in the country.

The NCR contributes 30 percent of the country’s GDP.

On Thursday, the BSP announced the establishment of a P5-billion budget for special rediscounting loans, which banks could extend to micro, small and medium enterprise (SME) clients affected by typhoons Ondoy and Pepeng.

To avail of these loans, banks have to apply for the special rediscounting lines until December this year. A rediscounting facility is a standing credit window provided by the BSP so banks can refinance outstanding loans to their clients.

Rediscounting is a privilege of a qualified bank to obtain loans or advances from the BSP using the eligible papers of its borrowers as collaterals.

The BSP also decided to liberalize the guidelines on collateral by including extended/restructured loans among the re-discountable papers.

This will enable the banks to liquefy their exposure, and re-lend to borrowers affected by the typhoons.

Industrial, commercial areas most affected

Separately, the Philippine Insurers and Reinsurers Association (PIRA) said on Friday that the amount of losses to the non-life insurance industry reached P11 billion.

“The enormous amount of losses was due to the fact that the areas affected the most by the floods were industrial and commercial in nature and not mainly agricultural or residential,” Michael Rellosa, PIRA vice chairman, said during a press briefing.

Official estimates have yet to be made by the 87 member-companies, but he said the losses on motor vehicles with Acts of God coverage could reach P1 billion, while the remaining P10 billion would come from property losses.

“Bear in mind that a lot of factories and warehouses are located in Marikina, Pasig and Cainta. These factories have millions worth of machinery while the warehouses are already full with stocks for the Christmas season. All of these were destroyed,” Rellosa said, adding that commercial enterprises sustained heavy losses in lost inventories.

Pedro Benedicto, vice chairman of PIRA’s ad hoc committee for post calamity response, said the P11-billion damage from Ondoy was not the biggest payout that non-life insurers would have to make.

“The major payouts we made were in the nineties during the 1991 earthquake and the eruption of Mount Pinatubo. Our payouts ran in billion pesos,” he said.

Rellosa assured claimants that insurance companies are speeding up the processing of claims, including relaxing documentary requirements if possible.

But the sheer volume of claims and the staggering number of damaged cars and homes to be inspected and assessed have become a challenge for adjusters and repair shops, the industry official said.

“Towing companies are simply overwhelmed by the number of damaged vehicles and the repair shops now having waiting times of 25 days to as long as three months. We hope our customers would understand. We’re doing our best to assist them as fast as we could,” he said.

Ernesto Echauz, chairman of Standard Insurance Co. Inc., said the company alone has serviced about 300 vehicles from more than 60 dealer tie-ups, corporate fleet clients and branches in Metro Manila which is still within one percent of its motorcar policies with Act of God coverage.

For its part, Generali Pilipinas said it was extending the grace period for payments of policies of its insured clients residing in the Ondoy calamity areas.

The extension granted was for an additional 45 calendar days, making up a total of 75 days grace period covering due dates from August to October this year.

“This initiative is in recognition of the financial dislocation our clients who are suffering from the lack of banking and communication facilities in the affected areas,” Joe Ferreria, chief agency officer, said.

“Another 30 days is usually the industry norm, but due to the massive devastation of the typhoon, rehabilitation takes time,” he added.

The PIRA assured policyholders that its 87 members were amply protected by the reinsurance to allay fears that they would go bankrupt. –Maricel E. Burgonio Senior Reporter and Lailany P. Gomez Reporter, Manila Times