Among Listed Philippine Banks, Philippine Savings Bank Reaches Borderline Insolvency

Editor's Note: 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 

Editor's Note: This is an update of an earlier post: "Slight Deterioration in the Solvency of Listed Philippine Banks" dated December 22, 2011.


Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets decreased by PHP 7.565 billion or 2.85% from September 30, 2011 to December 31, 2011.  This was slightly offset by an increase of PHP 11.380 billion or 2.98% in the Total Capital Cushion of these banks during the same period.  As a result, the Listed Banks Ratio of Distressed Assets to Total Capital Cushion decreased by 3.94% from 69.66% as of September 30, 2011 to 65.71% as of December 31, 2011.

Please note that the ratio of Distressed Assets to Total Capital Cushion of one bank on this list is above the borderline level of 100.00%.  This bank, Philippine Savings Bank, reached borderline insolvency ratio of 105.18% in the fourth quarter of 2011.  Its Total Distressed Assets climbed by PHP 3.359 billion to reach PHP 14.651 billion as of December 31, 2011 or 29.75% over the PHP 11.292 billion in Total Distressed Assets it posted last September 31, 2011.  Its Total Capital Cushion, declined by PHP 0.311 billion or 2.18% below the PHP 14.24 billion in Total Capital Cushion it posted as of September 30, 2011.  As a result, its ratio of Total Distressed Assets over its Total Capital Cushion increased by 25.89 percentage points to reach 105.18% in the fourth quarter of 2011 from 79.30% as of September 30, 2011.

  The banks that exhibited significant decreases in their insolvency ratios were:

1. Union Bank of the Philippines, which dropped from a borderline insolvent ratio of 100.84% as of September 30, 2011 to 85.31% as of December 31, 2011; and
2. Metropolitan Bank and Trust Company, which dropped from 71.43% as of September 30, 2011 to 62.99% as of December 31, 2011.

The study does not include figures for three banks, namely:

1. Export and Industry Bank, which had the highest borderline insolvency ratio of 1476.07% as of September 30, 2011;
2. Rizal Commercial Banking Corporation, which had a Total Distressed Assets to Total Capital Cushion ratio of 89.21% as of September 30, 2011; and
3. China Banking Corporation, which had a Total Distressed Assets to Total Capital Cushion ratio of 58.51% as of September 30, 2011.

The Published Statements of Condition as of December 31, 2011 for these banks were unavailable or were incomplete.

Listed Philippine Banks
Total Distressed Assets/ Total Capital Cushion
June 30, 2011 to September 30, 2011
Bank	September 30, 2011	December 31, 2011	Variance		% Variance
Allied Banking Corporation	72.98%	71.45%	-1.53%		-2.10%
Banco de Oro Unibank	61.04%	59.90%	-1.14%		-1.87%
Bank of the Philippine Islands	69.39%	63.71%	-5.68%		-8.19%
Metropolitan Bank and Trust Company	71.43%	62.99%	-8.44%		-11.81%
Philippine Savings Bank	79.30%	105.18%	25.89%		32.64%
Security Bank Corporation	48.03%	47.14%	-0.89%		-1.86%
Union Bank of the Philippines	100.84%	85.31%	-15.53%		-15.40%

Listed Philippine Banks
Total Distressed Assets/ Total Capital Cushion
September 30, 2011 to December 31, 2011
		September 30, 2011				December 31, 2011				Variance
Bank	Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)
Philippine Savings Bank	11.292	14.24	79.30%		14.651	13.929	105.18%		3.359	-0.311	25.89%
Union Bank of the Philippines	38.622	38.301	100.84%		38.823	45.507	85.31%		0.201	7.206	-15.53%
Allied Banking Corporation	13.724	18.806	72.98%		13.475	18.860	71.45%		-0.249	0.054	-1.53%
Bank of the Philippine Islands	57.862	83.386	69.39%		50.048	78.557	63.71%		-7.814	-4.829	-5.68%
Metropolitan Bank and Trust Company	63.939	89.51	71.43%		63.788	101.262	62.99%		-0.151	11.752	-8.44%
Banco de Oro Unibank	67.522	110.622	61.04%		65.154	108.776	59.90%		-2.368	-1.846	-1.14%
Security Bank Corporation	12.832	26.716	48.03%		12.289	26.070	47.14%		-0.543	-0.646	-0.89%
Total	265.793	381.581	69.66%		258.228	392.960	65.71%		-7.565	11.380	-3.94%

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 December 31, 2011 as published in their respective websites.  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.