RCBC and Security Bank disclose investments in US financial giants

MANILA, Philippines - Only two of six local banks which made disclosures to regulators on Wednesday were facing possible loss of investments from their exposure to ailing US financial institutions. The announcements to the Philippine Stock Exchange came a day after the Philippines’ two largest lenders, Metropolitan Bank & Trust Co. and Banco de Oro Unibank Inc. said they made provisions for possible writeoffs owing to their investments in Lehman Brothers, which went bankrupt. Yuchengco-led Rizal Commercial Banking Corp said that it has exposure to Lehman Brothers and has allocated P980 million from its current excess reserves for any possible writedown. "This provisioning will have no adverse effect on RCBC's capital base." RCBC reported that its capital base was at P27.4 billion with a capital adequacy ratio of 20.97 percent as of June 30 and that it is expecting a net income of between P2.5 billion and P2.8 billion for this year. Security Bank Corp., on the other hand, stated that it has a $10-million exposure to Merril Lynch, which will be acquired by the Bank of America. But it said it has no direct or indirect exposure to Lehman Brothers, US fourth-largest investment house. However, Security Bank assured the regulator that it has improved its "asset quality indices" and that its non-performing loans was at a ratio of 1.4 percent and an NPL cover of 298 percent. Sy-controlled China Banking Corp., Aboitiz-led Union Bank, Ayala-owned Bank of the Philippine Islands and Philippine Savings Bank, an affiliate of Metrobank all said they have on investments in Lehman Brothers. On Tuesday Canadian insurance firm Sun Life Financial Inc. said its third quarter earnings might be affected by its exposure to Lehman Brothers as it holds $334 million par value of Lehman bond securities and about $15 million net value of Lehman derivative instruments." BDO said it was allocating P3.8 billion to cover its exposure to Lehman Brothers, while Metrobank said it had made provisions amounting to $14 million. The country’s largest lender said it was holding $20.4-million worth of bonds issued by the US investment bank and another P2.4-billion loan to Lehman Brothers' Philippine-based subsidiary. GMANews.TV