Export and Industry Bank Becomes Even More Insolvent! - September 30, 2011

Editor's Note:  This blog was inspired by the spectacular failure of Banco Filipino Savings and Mortgage Bank for the second time in its 38 years of existence.  This blog post and other blog posts like it attempt to describe why the bank failed.  But it also attempts to assess what other Philippine Banks have the potential to fail in the not too distant future. To see blog posts on other banks, click on the Banco Filipino Graphic at the top of the blog or click on the blog archive on the right hand column, or simply go to bancofilipinofailure.blogspot.com.




Editor's Note:  When LBC Development Bank failed last September 2011, the Philippine Deposit Insurance Corporation (PDIC) advised consumers to wisely choose the banks where they will deposit their money. The trouble is, most depositors don't and can't read financial statements before they open a bank account. The regulators, whose job is to safeguard the public's money, have not done a good job recently.  In the past ten years, two commercial banks, twenty-one thrift banks, and a staggering 187 rural banks have collapsed, often quite suddenly and without warning:  http://www.gmanetwork.com/news/video/93600/saksi-pagsasara-ng-banco-filipino-at-lbc-devt-bank-ikinadismaya.  Regulators do have a problem bank list that they do not divulge to the public, for fear of sparking another bank run. So who can the public turn to, to advise them where to put their money? No one, except the banks themselves who will always promote their self-interests. This analysis is an attempt to fill in that knowledge gap, by screening out the weaker banks that seem ready to implode at any given moment.


Editor's Note: The ratio of Distressed Assets to Total Capital Cushion is a variant of the famous Texas Ratio, which was widely used by US financial regulators to predict bank failure during the US Savings and Loan Crisis in the 1980s and early 1990s. The basic premise is that a bank with Distressed Assets greater than its Capital Cushion is in danger of insolvency, because a significant drop in the value of  the Distressed Assets will eat into a significant amount of the bank's capital.  For a more detailed discussion of this ratio, please visit a previous blog post: The Texas Ratio of Select Philippine Banks


Based on the individual Published Statements of Condition for the Philippine Commercial Banking Industry (from www.bsp.gov.ph), Total Distressed Assets of Philippine Thrift Banks decreased by PHP 6.0 billion or 1.08% from June 30, 2011 to September 30, 2011.  Total Capital Cushion of Philippine Commercial Banks increased by 0.82% during the same period.  As a result, the Commercial Bank's Ratio of Total Distressed Assets to Total Capital Cushion decreased by 1.63%, from 87.20% as of June 30, 2011 to 85.57% as of September 30, 2011.  

Those banks that posted significant improvements in this ratio include:

1. Rizal Commercial Banking Corporation (16.74% decrease)
2. Asia United Banking Corporation (11.55% decrease)

The banks that exhibited significant deterioration in this ratio include:

1. Export and Industry Bank (71.16% increase)
2. BDO Private Bank (49.53% increase)

Export and Industry Bank remains the top distressed bank with a ratio of 1475.34%.  This means that its Total Distressed Assets is 14 times its Total Capital Cushion.  Although Total Distressed Assets dropped by  PHP 1.1 billion or 7.40% during the third quarter of 2011, it Total Capital Cushion dropped by an even greater percentage, 45.90% or PHP 770 million.  As a result, the bank now has to support a still significant amount of distressed assets with an even smaller Total Capital Cushion.   As a result, its distressed ratio climbed 71.16%  from 861.95% to 1475.34% during the third quarter, dethroning United Coconut Planters Bank as the most insolvent commercial bank.

Although BDO Private Bank's distressed ratio jumped by 49.53% during the third quarter, the bank still remains very solid, with a distressed asset ratio of only 3.55%

All the banks that were flagged as borderline insolvent (highlighted in yellow) as of June 30, 2011, remain borderline insolvent as of September 30, 2011.  However, as a group the banks showed some improvement in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 200.86% as of September 30, 2011, down from 207.39% as of June 30, 2011.

Philippine Commercial Banking System
Total Distressed Assets/Total Capital Cushion
June 30, 2011; September 30, 2011
Name of Bank	June 30, 2011	September 30, 2011	Variance	% Variance
Export and Industry Bank	861.95%	1475.34%	613.39%	71.16%
BDO Private Bank, Inc.	2.38%	3.55%	1.18%	49.53%
Land Bank of the Philippines	66.01%	72.55%	6.54%	9.91%
China Banking Corporation	53.51%	58.51%	5.00%	9.34%
Philippine Veterans Bank	176.82%	189.62%	12.80%	7.24%
Metropolitan Bank and Trust Co.	67.10%	71.43%	4.33%	6.45%
Security Bank Corporation	46.50%	48.03%	1.53%	3.29%
Development Bank of the Philippines	45.21%	46.15%	0.94%	2.08%
Banco de Oro Unibank Inc.	59.95%	61.04%	1.09%	1.81%
Al-Amanah Islamic Bank of the Philippines	15.49%	15.69%	0.20%	1.29%
Allied Banking Corp	72.45%	72.98%	0.53%	0.73%
Union Bank of the Philippines	101.23%	100.73%	-0.50%	-0.49%
Robinsons Bank Corporation	22.57%	22.45%	-0.12%	-0.51%
Philippine Trust Company	56.93%	55.66%	-1.27%	-2.24%
Philippine National Bank	175.98%	170.82%	-5.16%	-2.93%
Bank of Commerce	183.54%	178.08%	-5.46%	-2.97%
Philippine Bank of Communications	157.42%	152.23%	-5.19%	-3.30%
East West Banking Corporation	57.00%	53.66%	-3.34%	-5.85%
Maybank Philippines Inc.	74.75%	69.08%	-5.67%	-7.59%
Chinatrust (Philippines) Commercial Banking Corporation	18.17%	16.63%	-1.54%	-8.49%
Bank of the Philippine Islands	68.23%	61.77%	-6.46%	-9.47%
United Coconut Planters Bank	1043.55%	944.09%	-99.46%	-9.53%
Asia United Bank Corporation	53.14%	47.00%	-6.14%	-11.55%
Rizal Commercial Banking Corporation	88.89%	74.01%	-14.88%	-16.74%
Total	87.20%	85.57%	-1.63%	-1.87%

Philippine Commercial Banking System
Total Distressed Assets/Total Capital Cushion
June 30, 2011; September 30, 2011
		June 30, 2011				September 30, 2011				Variance
Name of Bank	Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)
Export and Industry Bank	14,458,270,823	1,677,395,008	861.95%		13,387,636,560.00	907,425,561.00	1475.34%		-1,070,634,262.51	-769,969,447.28	613.39%
United Coconut Planters Bank	63,582,551,543	6,092,902,366	1043.55%		58,433,954,233.82	6,189,438,043.36	944.09%		-5,148,597,309.14	96,535,677.03	-99.46%
Philippine Veterans Bank	10,793,283,851	6,104,008,005	176.82%		10,879,880,413.60	5,737,758,181.67	189.62%		86,596,562.55	-366,249,822.99	12.80%
Bank of Commerce	34,079,111,819	18,567,548,952	183.54%		32,699,114,872.49	18,361,861,626.49	178.08%		-1,379,996,946.06	-205,687,325.14	-5.46%
Philippine National Bank	67,328,146,755	38,258,170,887	175.98%		64,949,186,122.23	38,021,318,336.45	170.82%		-2,378,960,632.31	-236,852,550.27	-5.16%
Philippine Bank of Communications	9,595,738,480	6,095,646,203	157.42%		9,291,519,325.92	6,103,760,074.12	152.23%		-304,219,154.24	8,113,870.81	-5.19%
Union Bank of the Philippines	38,686,115,495	38,215,201,705	101.23%		38,582,465,913.28	38,301,194,129.33	100.73%		-103,649,581.43	85,992,424.78	-0.50%
Rizal Commercial Banking Corporation	29,422,619,799	33,098,977,764	88.89%		27,086,579,563.52	36,598,227,573.49	74.01%		-2,336,040,235.81	3,499,249,809.23	-14.88%
Allied Banking Corp	13,666,644,816	18,864,154,432	72.45%		13,724,401,446.84	18,805,704,450.28	72.98%		57,756,630.67	-58,449,981.31	0.53%
Land Bank of the Philippines	33,674,734,170	51,018,455,764	66.01%		36,986,132,132.78	50,983,030,868.93	72.55%		3,311,397,963.28	-35,424,894.90	6.54%
Metropolitan Bank and Trust Co.	61,204,448,235	91,211,572,886	67.10%		63,938,649,304.53	89,510,341,778.10	71.43%		2,734,201,069.07	-1,701,231,107.77	4.33%
Maybank Philippines Inc.	2,885,632,467	3,860,486,796	74.75%		2,736,360,904.56	3,961,339,978.25	69.08%		-149,271,562.31	100,853,182.39	-5.67%
Bank of the Philippine Islands	52,695,277,237	77,234,921,045	68.23%		50,690,573,945.83	82,069,124,131.12	61.77%		-2,004,703,291.52	4,834,203,085.89	-6.46%
Banco de Oro Unibank Inc.	65,864,445,826	109,860,626,879	59.95%		67,521,482,859.14	110,621,563,730.79	61.04%		1,657,037,032.72	760,936,851.45	1.09%
China Banking Corporation	18,929,269,093	35,375,252,052	53.51%		21,369,318,244.66	36,522,588,097.69	58.51%		2,440,049,151.41	1,147,336,045.25	5.00%
Philippine Trust Company	8,371,957,051	14,706,042,250	56.93%		8,185,195,998.45	14,706,678,620.05	55.66%		-186,761,052.48	636,370.25	-1.27%
East West Banking Corporation	7,785,482,387	13,658,337,804	57.00%		6,350,758,139.69	11,834,102,039.71	53.66%		-1,434,724,246.92	-1,824,235,763.82	-3.34%
Security Bank Corporation	12,417,011,913	26,704,026,194	46.50%		12,831,498,874.37	26,715,472,886.65	48.03%		414,486,961.68	11,446,692.56	1.53%
Asia United Bank Corporation	5,028,943,242	9,463,768,761	53.14%		4,493,923,413.49	9,561,720,005.85	47.00%		-535,019,828.61	97,951,244.60	-6.14%
Development Bank of the Philippines	16,102,560,609	35,619,524,656	45.21%		16,528,998,918.41	35,817,588,465.99	46.15%		426,438,309.17	198,063,810.16	0.94%
Robinsons Bank Corporation	1,170,442,853	5,186,575,437	22.57%		1,164,334,016.52	5,186,142,534.87	22.45%		-6,108,836.01	-432,901.95	-0.12%
Chinatrust (Philippines) Commercial Banking Corporation	1,229,881,701	6,769,716,049	18.17%		1,082,554,081.24	6,511,597,089.04	16.63%		-147,327,619.40	-258,118,960.03	-1.54%
Al-Amanah Islamic Bank of the Philippines	82,367,083	531,760,081	15.49%		83,467,825.43	532,017,355.74	15.69%		1,100,742.54	257,274.39	0.20%
BDO Private Bank, Inc.	107,766,880	4,533,101,346	2.38%		161,347,789.04	4,538,697,736.16	3.55%		53,580,908.68	5,596,389.90	1.18%
Total	569,162,704,126.82	652,708,173,321.90	87.20%		563,159,334,899.84	658,098,693,295.13	85.57%		-6,003,369,226.98	5,390,519,973.24	-1.63%

Disclaimer:


This list only serves as a screening guide.  It is not a definitive guide and must be taken in the context of other factors.  The figures are based on the individual banks' statement of condition as of September 30, 2011 as published in the BSP website (www.bsp.gov.ph). For this analysis, no attempt was made to go through the audited financial statements of each bank. Readers are suggested to make their own investigations and verify the figures presented. Both BSP and PDIC have their own problem bank screening systems that are much more sophisticated in scope and design, given that they have more access to information over the banks they regulate.