Landbank seeks jt venture to settle NPLs

The Land Bank of the Philippines (LBP) plans to settle its bad debts or non-performing loans (NPLs) of P29.6 billion along with foreclosed properties worth P11.1 billion by entering into a joint venture with a foreign investment bank or other institutions.

Landbank officials said the state-run bank is currently scouting for a possible joint venture partner which has the financial muscle to help the bank turn around its NPLs and acquired properties.

Previously, Landbank president Gary B. Teves said the bank’s strategy for reducing its NPLs by at least P10 billion by yearend includes partnership with foreign banks offering various recovery options such as outsourcing loan workouts, outright sale of NPLs, and transfer of NPLs or ROPOA to an asset management company (AMC).

But Landbank now prefers a joint-venture arrangement because this will enable the bank to still make money off its assets once the economy turns around. An outright sale on the other hand, would be virtually giving the assets since they will just be sold at 20 percent of their real value.

Several investment banks earlier offered to form an AMC. These include US-based Cerberus, Deutsche Bank, Lehman Brothers, Credit Suisse, Bank of America, Arthur Andersen and JP Morgan. Recently, the Singapore-based Lone Star Asia Pacific also submitted a proposal for a strategic partnership with Landbank.

An earlier plan to go into a joint venture with Metropolitan Bank and Trust Co. (Metrobank) fell through. The partnership, had it pushed through, would have been ideal because both banks share common NPLs such as their exposure in Mimosa Leisure and Resort Corp. (MLRC), Reynolds Corp. and Bacnotan Cement. Landbank’s exposure in these entities total P2 billion.

Landbank’s bottom line has been affected by its NPLs which as of May this year accounted for 23 percent of its total loan portfolio.

To reduce its NPLs, the bank is pursuing a program to cut its bad loans by focusing on the top 50 past due loan accounts. The program includes measures such as cash collections, restructuring of loans, dacion en pago and foreclosure.

Included in Landbank’s top 50 bad loans are its P1.5 million exposure in Petrochemical Corp., of Asia Pacific; P1.2 billion in National Steel Corp., P939 million in All Asia Capital; P935 million in Reynolds Corp., P389 million in Victorias Milling Corp., and P400 million in Profinda Co.

Landbank said that instead of allowing its NPLs and ROPOA to accumulate, the bank has set up a team to monitor and check on these accounts on a monthly basis to ensure that disposal measures are pursued more aggressively.

Landbank’s ROPOA surged 26 percent to P11.1 billion as of end May from P8.8 billion during the same period last year. The share of ROPOA to total LBP assets stood at 4.6 percent as of end March this year.

Industry statistics show, Landbank’s ROPOA ranked fourth-next to Philippine National Bank, Metrobank and United Coconut Planters Bank.

Currently, Landbank is implementing an asset disposition program focusing on streamlining operating procedures to shorten processing time; enhancing marketability of assets and widening of distribution channels by hiring property brokers and leasing agents to market foreclosed properties.

Landbank and other the bad debts of other banks mounted significantly at the height of the Asian financial crisis in 1998 as banks had difficulty collecting past due loans from their clients.

The NPLs of the banking industry further deteriorated to 17.72 percent to total loan portfolio (TLP) in July, up by 0.76 percentage points from 16.96 percent in June.

In absolute terms, the NPL volume went up by 4.2 percent to P278.390 trillion from P267.116 trillion in the previous month.

"The higher NPL ratio in July largely reflected the lagged impact of sharply higher interest rates and weaker peso toward end 2000 as the country headed into parallel crisis," Bangko Sentral ng Pilipinas (BSP) Deputy Governor Alberto V. Reyes said, referring to the uncertainties and nervousness in the first semester.

The BSP said the volume of bad loans went up even as the total loan portfolio of the country’s 45 operating commercial banks contracted 0.3 percent or P4 billion to P1.571 trillion from P1.575 trillion.