More banks signal intent to sell NPAs
By Luz Wendy T. Noble, Reporter
ANOTHER asset management company (AMC) has been given regulatory approval to buy banks’ bad assets amid the pandemic.
This as more banks expressed intent to avail themselves of the incentives under the Financial Institutions Strategic Transfer (FIST) Law as they seek to improve asset quality by disposing of nonperforming assets (NPAs).
Based on the latest directory of the Securities and Exchange Commission (SEC), there are already six FIST corporations (FISTCs) as of March 24. PI One FISTC-AMC was added to the list.
The Finance department said there were five FISTCs as of January, namely the Philippine Equitable Recovery FIST-Asset Management Corp., Philippine Recovery Co. FISTC-AMC, Inc., Argo Global Servicing Philippines (FIST-AMC), Collectius FISTC-AMC Private Ltd. Corp., and Resurgent Capital (FISTC-AMC), Inc.
Republic Act 11523 or the FIST Law was signed in February last year and allowed for the creation of SEC-registered AMCs that can help banks clean their balance sheets after the rise in bad assets during the pandemic.
Assets that will be recognized as nonperforming until Dec. 31, 2022 will be eligible to be sold under the law to FISTCs.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said they have received applications for validation of a master list of nonperforming assets from 14 banks. This was higher than the 11 banks as of January.
So far, the BSP has validated four banks’ final master list of eligible NPAs, while the rest are still in various stages of evaluation, Ms. Fonacier said.
“Based on latest simulation, the implementation of the FIST Act is projected to result in disposal of NPAs consisting of nonperforming loans (NPL) of P157.2 billion and Real and Other Properties Acquired of P49.2 billion under an assumed disposal rate of 30%, similar to that experienced during the 1997 Asian Financial Crisis,” Ms. Fonacier said in a Viber message.
Ms. Fonacier said they have not yet received an application for issuance of Certificate of Eligibility from BSP-supervised financial institutions on the transfer of NPAs pursuant to the FIST Act as of now.
“However, submission of master list applications to the BSP by these banks signifies their intention to avail of the incentives under the said law,” she said.
The Certificate of Eligibility of a financial institution looking to sell NPAs will be provided to the SEC and Bureau of Internal Revenue for reference on tax incentives.
Among big banks, Philippine National Bank (PNB) and Rizal Commercial Banking Corp. (RCBC) said they are interested in selling NPAs through the FIST Law.
“We are considering offloading consumer and business loans which are not susceptible to the normal collection process and those will take too much time to collect,” PNB said in an e-mail to BusinessWorld.
“RCBC is looking to offload some of its assets through the FIST Law, as we would like to take advantage of the investors’ increased appetite to invest in distressed assets, given the tax incentives that they can avail,” the Yuchengco-led lender said in an e-mail.
When asked, BDO Unibank, Inc. and Metropolitan Bank & Trust Co. said they are not keen on tapping the provisions of the FIST Law.
Latest BSP data showed the NPL ratio of the banking industry hit a three-month high of 4.24% in February. Bad loans rose 2.38% to P472.774 billion from a year earlier.
During the pandemic, the NPL ratio hit a 13-year high of 4.51% from July to August 2021, which is still much lower than the 17.6% seen in the aftermath of the Asian Financial Crisis in 2002.
