relax, just do it

Relaxed rules boost banks’ income
BWorld/12.08.08

PHILIPPINE BANKS reported better earnings and stronger balance sheets in the third quarter after relaxed accounting rules allowed them to revise their financial statements.

The reclassification, which lapsed last Nov. 30, allowed financial institutions to move their equity and debt investments out of the trading category to the loan or until maturity categories, giving banks reprieve from marking hard-to-value assets down to fire sale prices.

Banco de Oro Unibank, Inc. (BDO), whose balance sheet was hurt after setting aside provisions for its exposure to failed American investment bank Lehman Brothers, benefited from regulators’ move and saw its net income loss narrowed to P804.6 million from a previously reported P1.3 billion in the third quarter, the bank’s amended financial statements showed.

In the nine months to September, the Sy-led bank’s net income attributable to shareholders rose by P500 million to P1.56 billion from the P1.06 billion announced earlier.

Top-tier Metropolitan Bank & Trust Co. (Metrobank) similarly benefited from eased accounting rules, allowing it to raise its bottomline to P1.147 billion in the third quarter from the P1 billion reported earlier, it said in a separate disclosure to the stock exchange last week.

Metrobank, which reclassified at least P1.46 billion worth of financial assets from held-for-trading to the available-for-sale category, saw its net profit in the nine-month period jump to P4.27 billion from P4.2 billion previously announced.

The George SK Ty-led bank also has Lehman-related investments through a P2.4-billion loan it extended to two Philippine-based subsidiaries of the bankrupt US investment bank.

Allied Banking Corp. of tobacco magnate Lucio Tan, meanwhile, said its net profit in the third quarter ending September grew by more than a two-fold to P81.746 million from an earlier reported P31.965 million following the reclassification of financial assets.

The Tan-owned bank said it transferred $192.96 million worth of assets to the held-to-maturity category.

In a separate disclosure, Aboitiz-controlled Union Bank of the Philippines, Inc. said it trimmed its net unrealized loss from its dollar-denominated government bonds to $4.75 million with the asset reclassification.

"The parent company’s year-to-date net unrealized gain/loss from the total dollar Government Bonds Portfolio would have amounted to USD 20,435,773.45 had it not reclassified the above portfolio," the bank said.

The reclassification was an offshoot of a Nov. 14 decision by the Securities and Exchange Commission to amend Philippine Accounting Standard 39: Financial Instruments Recognition and Measurement and Philippine Financial Reporting Standard 7: Financial Instruments Disclosures.

The move followed a similar directive issued by the central bank in October.

The change provides companies relief from the mark-to-market accounting rule, said to be responsible for adding to the global financial turmoil as it trapped distressed financial institutions in a capital-raising spiral. — M. E. I. Calderon