RP banks' Lehman exposure insignificant - S&P

Standard & Poor’s Ratings Services said yesterday the direct exposures of local banks to Lehman Brothers were not significant enough to damage their credit profiles.

S&P said the strong balance sheets of the banks that have disclosed direct exposures in Lehman Brothers and its related interests would support their current standings.

Earlier this week, Metropolitan Bank and Trust Co, Banco de Oro and Rizal Commercial Banking Corp. have disclosed having made provisions for losses resulting from the collapse of one of the oldest financial institutions in the US.

“A few Taiwan, Philippine, and Chinese banks appear to have more direct exposure to Lehman Brothers entities,” said S&P credit analyst Ritesh Maheshwari.

“However, Asian banks’ strengthened balance sheets, as a result of healthy profits over the vibrant economic environment during the past half a decade, can withstand the impact of likely losses from direct exposure, without rating downgrades,” Maheshwari said.

According to Maheshwari, the bigger risk was more from the impending economic slowdown and market turmoil than from direct exposure to the distressed US financial institutions.

Maheshwaris said Asian banks’ exposure to structured finance products were similarly not material enough to create a substantial damage.

The Bangko Sentral ng Pilipinas (BSP) earlier estimated that the direct exposure of Philippine banks to Lehman was around P15 billion, around 0.3 percent of the industry’s total asset base.     

At most, Maheshwari said the latest turmoil in the US financial sector beginning with Lehman Brothers Holdings’ bankruptcy filing and uncertainties about AIG’s flexibility in meeting additional collateral needs, could accelerate and exacerbate the economic impact on Asia.

S&P said a slower economic growth posed turbulence but no crisis for Asian banking in general.

Amid the panic that followed after Lehman’s collapse, Philippine officials said depositors had no cause to worry because banks are strong enough to absorb possible losses.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the BSP had conducted a survey of Philippine banks to determine exactly how big the problem could be.

While there were large banks with exposure to Lehman and it’s related interests, Tetangco said the amount was small in relation to the industry’s P5-trillion asset base and P500-billion capital base.