The casualties of the Lehman collapse are popping up, one by one.
First, the Philippine economy. Socioeconomic Planning Secretary Ralph Recto now has a worst-case scenario forecast of 4.7 percent to 5.5 percent for gross domestic product for the year, down from an already revised 5.5 percent to 6.4 percent.
You know already that two of the nation’s biggest lenders, Metropolitan Bank & Trust Co. and Banco De Oro have hits on their portfolio. Rizal Commercial Banking Corp. (RCBC) today also revealed its exposure to Lehman. Together, the three banks have set aside $120 million in provisions—meaning there’s cash made available for any write down in the future.
All in all, the central bank says the total exposure of the banking system is 0.3 percent to 0.4 percent of the banking system’s total assets. That’s around P15 billion, but one industry estimate says the exposure could go up to as high as P23 billion. Not worrisome, says the central bank. The amount may look huge, but it will not drive banks to suffer any liquidity problems, it says. Worst thing that can happen is some erosion in net incomes. We can only wait for reality to unfold–and hold our breaths.
Are depositors panicking? I don’t see any lines, thank heavens. Whether that’s because Filipinos are not worried or they don’t understand what is happening, I don’t know. In this case, ignorance can bring about bliss.
Those who do not have exposures and are confident enough to come out and say it are: Sun Life’s Philippine unit (it’s the mother company that has exposure), Bank of the Philippine Islands, Union Bank of the Philippines, Government Service Insurance System and Social Security System.
Those who would like to know how the subprime crisis began might want to read Reyna Elena’s blog here.
And if you are wondering what the ultra rich are doing these days, they are paying $970,000 for a contemporary oil painting of kitchenware by Indian artist Subodh Gupta. Sigh. Wouldn’t you like to be filthy rich in this day and age?
September 18th, 2008 at 11:33 am
Mommy Banker: hehehehe loved the power point on subprime mortgage for dummies. I’ve got the youtube video of that. Check out http://www.zdiaz.com/index.php/2008/06/20/idiots-guide-to-the-subprime-mortgage-crises/
September 18th, 2008 at 5:18 am
Good thing Philippine banks have learned from the US experience. It is better to show their exposure and allot money that could cover possible losses now than try to hide it in their balance sheet.
September 18th, 2008 at 1:23 am
There’s also a great stick-figure powerpoint presentation illustrating the root case of the subprime crisis:
http://mommybanker.wordpress.com/2008/02/20/sub-prime-crisis-for-dummies/
AIG is largely perceived to be “too big to be allowed to fail”. If it did, the impact would be immediately felt on Main Streets around the world. AIG is the world’s largest insurer, doing business with thousands of companies around the world.
I get the sinking feeling that we haven’t seen the bottom yet and we are up for more turbulent times ahead.
September 17th, 2008 at 10:46 pm
what about the mutual funds, esp. alfm - should they also come out & divulge their exposure not only to Lehmans but to Merrill Lynch & AIG as well?
I have some amounts with alfm, do you think I have to get out @ this time?
thanks.
September 17th, 2008 at 10:36 pm
I think whats happening today is just a scenario for a bigger event. First the oil now the money and then the shortage of food. If this 3 comes together in the near future, there will be chaos all over the globe. And if there is chaos, military rule will prevail just to prevent people for demonstrating their grivances. And what next? New world order.