Philippine slowdown seen bottoming soon, says LBP

Philippine slowdown seen bottoming soon, says LBP

CHIANG MAI, Thailand (Reuters): Philippine banks will likely experience the worst impact of the Asian financial crisis in the last quarter of 1998 before seeing their positions improve next year, the head of the Landbank of the Philippines said on Thursday.

LBP president Florido Casuela told Reuters in an interview he expected non-performing loans (NPLs) of his bank to peak at around 11 percent of total lending by the end of 1998, from a current 8.6 percent, before they decline to nine to 10 percent in 1999.

"I am optimistic about 1999, because we have gone through a the crisis for over a year now and should be near hitting the bottom," he said.

Casuela, in this northern Thai city for a conference of regional bankers, said the level of LBP's sour loans reflected the industry average in the Philippines.

Casuela said his 330-branch state-owned bank, ranked third in the Philippines in terms of assets, extended about 80 percent of its loans to commercial borrowers.

The Philippine central bank said recently that NPLs for all banks fell to 9.7 percent of total loans in June from 10.4 percent in May, but against just over five percent at the end of 1997.

For commercial banks alone, NPLs were at 8.95 percent in June, against 9.4 percent in May.

Casuela said most of his bank's NPL's were provided to the Philippines real-estate and residential housing sector.

He said some concessional agricultural loans also turned sour as borrowers, including rice and sugar cane companies, sustained losses from natural calamities and climatic changes caused by the El Nino and El Nina phenomena.

Casuela disagreed with rating agency Standard & Poor's Corp's projection in September that Philippine bank's NPL's may exceed 20 percent in 1999, saying it was too high.

Philippine prime lending rates have declined to 15 percent from about 36 percent in 1997 and they should ease further to 13 to 14 percent next year, he said.

"We could not completely isolate ourselves from the Asian crisis but our banking sector has benefited from gradual structural reforms," Casuela said.

The Philippine central bank late last year toughened NPL classification by redefining them as loan three months overdue, against six months earlier.