DEPT OF FINANCE ORDERS AUDIT ON LOAN PORTFOLIO OF UCPB

Manila, July 13, 2003 By Des Ferriols (Star) The Department of Finance (DOF) has ordered an audit into the loan portfolio of the United Coconut Planters Bank (UCPB) to examine all loans extended by the bank since it was taken over by the government in 1986.

This developed as finance officials revealed over the weekend that UCPB would need fresh infusion in about five years, although an additional cash infusion from the Philippine Deposit Insurance Corp. (PDIC) was immediately ruled out.

Sources said the DOF had created a task force headed by Finance Undersecretary Eric O. Recto to conduct a comprehensive audit of the bank as part of the due diligence study of the PDIC.

The task force is looking into UCPBs loan portfolio, its financial records and its overall operations since it came under sequestration by the Presidential Commission on Good Government (PCGG) after the first EDSA Revolution.

According to the same sources, the audit firm, KPMG,

has been hired to examine UCPBs books, with particular interest on its loan portfolio, part of which would be acquired by the PDIC as part of the rescue plan.

KPMGs audit would be one of the primary basis for PDICs decision when it finalizes the portion of the financial rescue package that involved its purchase of some P13 billion worth of non-performing loans (NPLs) from UCPB.

PDIC had agreed to buy P8 billion worth of NPLs outright and purchase another P5 billion worth of NPLs but with a repurchase option to allow UCPB to buy back some of the loans.

Recto confirmed he is heading the task force, but declined to disclose information on the progress or initial indications uncovered by the KPMG audit. "Suffice it to say that DOF orders it is being done but it is premature to say that the initial findings are in fact indicative of what really happened," Recto said. "We have to complete the audit before we can say anything conclusive."

Recto said the audit covered the period since PCGG took over UCPB until the present management.

"PDIC is putting a lot of money in UCPB," Recto pointed out. "It stands to reason that it will want to safeguard its interests in the bank and to be able to do that, it has to find out exactly what is going on and what has gone on in the past in order to get to the bottom of how UCPB ended up where it is now."

Earlier reports indicated that UCPB had allegedly handed out "behest loans" to certain favored clients, specifically corporations linked to businessman Eduardo "Danding" Cojuangco Jr.

However, sources said KPMG was told to audit the entire portfolio, including UCPB-underwritten loans that have since defaulted and are now under litigation by the Securities and Exchange Commission (SEC).

"UCPB, through its affiliate, UCAP, was the underwriter for a number of huge loans to property companies at a time when the property sector was already well on its way to the slump," sources pointed out.

These property firms included, among others, Primetown Properties, Ever Gotesco and even C&P Homes, the low-cost housing empire founded by Sen. Manuel Villar.

On the other hand, Recto confirmed reports that the PDIC infusion is not enough to bail out UCPB, adding that the bank would still need to recapitalize as soon as its ownership question has been resolved.

Recto said PDICs P20 billion bail-out package was "not the end-all and be-all" of UCPBs rescue plan, saying that full recovery would have to be funded through an earnest recapitalization program.

Recto said P20 billion is enough for UCPBs requirements over the next five years, if the bank intended to remain competitive among other bigger commercial banks and regain its standing in the industry.

At the height of its operations, UCPB was one of the biggest commercial banks in the country, acting as the administrator bank of the multi-billion-peso Coconut Industry Investment Fund (CIIF).


Reported by: Sol Jose Vanzi

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