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
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 8.1 billion or 1.46% from September 30, 2011 to December 31, 2011. Total Capital Cushion of Philippine Commercial Banks increased by 3.65% during the same period. As a result, the Commercial Bank's Ratio of Total Distressed Assets to Total Capital Cushion decreased by 4.93%, from 83.19% as of September 30, 2011 to 79.09% as of December 31, 2011. The results are skewed slightly lower by the absence of Export and Industry Bank, which, as of September 30, 2011, was ranked the most insolvent bank. See previous blog posts: "Export and Industry Bank Becomes Even More Insolvent! - September 30, 2011" and "Time is Running Out for Export and Industry Bank". Export and Industry Bank did not have a Published Statement of Condition on www.bsp.gov.ph as of the date of this blog post.
Those banks that posted significant improvements in this ratio include:
- Internationale Nederlanden Groep BK (36.28% decrease)
- BDO Private Bank, Inc. (29.85% decrease)
- Maybank Philippines Inc. (25.23% decrease)
- HongKong and Shanghai Banking Corporation (22.82% decrease)
- Union Bank of the Philippines (15.31% decrease)
- Asia United Bank Corporation (32.21% increase)
- East West Banking Corporation (27.38% increase)
None of the banks with significant increases have been classified as distressed based on their ratio of Total Distressed Assets to Total Capital Cushion as of the 4th Qtr. 2011.
United Coconut Planters Bank continues to rank as the most distressed commercial bank in the country. Its Total Distressed Assets are more than ten times in Total Capital Cushion, Three of the banks ranked as distressed in the 4th Qtr. of 2011 showed a deterioration in their distressed ratios. These are:
- United Coconut Planters Bank (6.30% increase)
- Philippine Bank of Communications (5.18% increase)
- Philippine Veterans Bank (3.13% increase)
- Philippine National Bank (13.50% decrease)
- Bank of Commerce (8.92% decrease)
Philippine Commercial Banking System | ||||
Total Distressed Assets/ Total Capital Cushion | ||||
September 30, 2011 to December 31, 2011 | ||||
In PHP | ||||
Name of Bank | September 30, 2011 | December 31, 2011 | Variance | % Variance |
Asia United Bank Corporation | 47.00% | 62.14% | 15.14% | 32.21% |
East West Banking Corporation | 53.66% | 68.36% | 14.69% | 27.38% |
Chinatrust (Philippines) Commercial Banking Corporation | 16.63% | 18.43% | 1.81% | 10.88% |
Development Bank of the Philippines | 46.15% | 49.44% | 3.29% | 7.14% |
United Coconut Planters Bank | 944.09% | 1003.58% | 59.49% | 6.30% |
Philippine Bank of Communications | 152.23% | 160.10% | 7.88% | 5.18% |
Bank of the Philippine Islands | 61.77% | 63.71% | 1.94% | 3.15% |
Philippine Veterans Bank | 189.62% | 195.56% | 5.94% | 3.13% |
Robinsons Bank Corporation | 22.45% | 22.46% | 0.01% | 0.05% |
Philippine Trust Company | 55.66% | 55.45% | -0.21% | -0.38% |
Al-Amanah Islamic Bank of the Philippines | 15.69% | 15.47% | -0.22% | -1.41% |
Security Bank Corporation | 48.03% | 47.14% | -0.89% | -1.86% |
China Banking Corporation | 58.51% | 57.42% | -1.09% | -1.87% |
Banco De Oro Unibank | 61.04% | 59.90% | -1.14% | -1.87% |
Allied Banking Corporation | 72.98% | 71.45% | -1.53% | -2.10% |
Bank of Commerce | 178.08% | 162.20% | -15.88% | -8.92% |
Land Bank of the Philippines | 72.55% | 65.30% | -7.25% | -9.99% |
Metropolitan Bank & Trust Company | 71.43% | 62.99% | -8.44% | -11.81% |
Rizal Commercial Banking Corporation | 74.01% | 64.70% | -9.31% | -12.58% |
Philippine National Bank | 170.82% | 147.76% | -23.06% | -13.50% |
Union Bank of the Philippines | 100.73% | 85.31% | -15.42% | -15.31% |
HongKong & Shanghai Banking Corporation | 92.97% | 71.76% | -21.21% | -22.82% |
Maybank Philippines Inc. | 69.08% | 51.65% | -17.43% | -25.23% |
BDO Private Bank, Inc. | 3.55% | 2.49% | -1.06% | -29.85% |
Internationale Nederlanden Groep BK | 17.81% | 11.35% | -6.46% | -36.28% |
Grand Total | 83.19% | 79.09% | -4.10% | -4.93% |
Philippine Commercial Banking System | |||||||||||
Total Distressed Assets/ Total Capital Cushion | |||||||||||
September 30, 2011 to December 31, 2011 | |||||||||||
In PHP | |||||||||||
September 30, 2011 | December 31, 2011 | Variance | |||||||||
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 %) | ||
United Coconut Planters Bank | 58,433,954,233.82 | 6,189,438,043.36 | 944.09% | 58,210,111,052.92 | 5,800,229,638.98 | 1003.58% | -223,843,180.90 | -389,208,404.38 | 59.49% | ||
Philippine Veterans Bank | 10,879,880,413.60 | 5,737,758,181.67 | 189.62% | 11,261,881,811.07 | 5,758,728,657.92 | 195.56% | 382,001,397.47 | 20,970,476.25 | 5.94% | ||
Bank of Commerce | 32,699,114,872.49 | 18,361,861,626.49 | 178.08% | 32,929,553,535.88 | 20,301,508,621.47 | 162.20% | 230,438,663.39 | 1,939,646,994.98 | -15.88% | ||
Philippine Bank of Communications | 9,291,519,325.92 | 6,103,760,074.12 | 152.23% | 9,471,188,959.63 | 5,915,638,902.18 | 160.10% | 179,669,633.71 | -188,121,171.94 | 7.88% | ||
Philippine National Bank | 64,949,186,122.23 | 38,021,318,336.45 | 170.82% | 61,539,362,228.07 | 41,647,300,624.97 | 147.76% | -3,409,823,894.16 | 3,625,982,288.52 | -23.06% | ||
Union Bank of the Philippines | 38,582,465,913.28 | 38,301,194,129.33 | 100.73% | 38,822,563,049.10 | 45,506,545,040.66 | 85.31% | 240,097,135.82 | 7,205,350,911.33 | -15.42% | ||
HongKong & Shanghai Banking Corporation | 5,182,943,886.09 | 5,574,647,606.25 | 92.97% | 3,990,058,443.49 | 5,560,159,799.26 | 71.76% | -1,192,885,442.60 | -14,487,806.99 | -21.21% | ||
Allied Banking Corporation | 13,724,401,446.84 | 18,805,704,450.28 | 72.98% | 13,475,330,400.74 | 18,859,833,076.12 | 71.45% | -249,071,046.10 | 54,128,625.84 | -1.53% | ||
East West Banking Corporation | 6,350,758,139.69 | 11,834,102,039.71 | 53.66% | 7,972,097,612.88 | 11,662,142,632.92 | 68.36% | 1,621,339,473.19 | -171,959,406.79 | 14.69% | ||
Land Bank of the Philippines | 36,986,132,132.78 | 50,983,030,868.93 | 72.55% | 33,266,907,399.89 | 50,944,842,479.97 | 65.30% | -3,719,224,732.89 | -38,188,388.96 | -7.25% | ||
Rizal Commercial Banking Corporation | 27,086,579,563.52 | 36,598,227,573.49 | 74.01% | 24,131,710,175.80 | 37,298,479,029.45 | 64.70% | -2,954,869,387.72 | 700,251,455.96 | -9.31% | ||
Bank of the Philippine Islands | 50,690,573,945.83 | 82,069,124,131.12 | 61.77% | 50,047,779,686.11 | 78,556,544,290.98 | 63.71% | -642,794,259.72 | -3,512,579,840.14 | 1.94% | ||
Metropolitan Bank & Trust Company | 63,938,649,304.53 | 89,510,341,778.10 | 71.43% | 63,787,741,208.04 | 101,261,532,842.48 | 62.99% | -150,908,096.49 | 11,751,191,064.38 | -8.44% | ||
Asia United Bank Corporation | 4,493,923,413.49 | 9,561,720,005.85 | 47.00% | 5,941,452,139.74 | 9,561,736,538.00 | 62.14% | 1,447,528,726.25 | 16,532.15 | 15.14% | ||
Banco De Oro Unibank | 67,521,482,859.14 | 110,621,563,730.79 | 61.04% | 65,154,415,706.61 | 108,776,275,232.51 | 59.90% | -2,367,067,152.53 | -1,845,288,498.28 | -1.14% | ||
China Banking Corporation | 21,369,318,244.66 | 36,522,588,097.69 | 58.51% | 23,774,532,770.51 | 41,406,720,599.32 | 57.42% | 2,405,214,525.85 | 4,884,132,501.63 | -1.09% | ||
Philippine Trust Company | 8,185,195,998.45 | 14,706,678,620.05 | 55.66% | 8,112,568,190.46 | 14,631,348,671.35 | 55.45% | -72,627,807.99 | -75,329,948.70 | -0.21% | ||
Maybank Philippines Inc. | 2,736,360,904.56 | 3,961,339,978.25 | 69.08% | 2,847,143,306.74 | 5,512,890,428.32 | 51.65% | 110,782,402.18 | 1,551,550,450.07 | -17.43% | ||
Development Bank of the Philippines | 16,528,998,918.41 | 35,817,588,465.99 | 46.15% | 17,694,996,122.18 | 35,788,905,692.76 | 49.44% | 1,165,997,203.77 | -28,682,773.23 | 3.29% | ||
Security Bank Corporation | 12,831,498,874.37 | 26,715,472,886.65 | 48.03% | 12,289,009,897.96 | 26,070,438,913.08 | 47.14% | -542,488,976.41 | -645,033,973.57 | -0.89% | ||
Robinsons Bank Corporation | 1,164,334,016.52 | 5,186,142,534.87 | 22.45% | 1,173,989,648.85 | 5,226,473,730.40 | 22.46% | 9,655,632.33 | 40,331,195.53 | 0.01% | ||
Chinatrust (Philippines) Commercial Banking Corporation | 1,082,554,081.24 | 6,511,597,089.04 | 16.63% | 1,112,691,065.96 | 6,036,104,571.35 | 18.43% | 30,136,984.72 | -475,492,517.69 | 1.81% | ||
Al-Amanah Islamic Bank of the Philippines | 83,467,825.43 | 532,017,355.74 | 15.69% | 82,421,466.30 | 532,866,747.85 | 15.47% | -1,046,359.13 | 849,392.11 | -0.22% | ||
Internationale Nederlanden Groep BK | 971,653,400.08 | 5,454,949,434.17 | 17.81% | 623,286,587.93 | 5,491,404,385.19 | 11.35% | -348,366,812.15 | 36,454,951.02 | -6.46% | ||
BDO Private Bank, Inc. | 161,347,789.04 | 4,538,697,736.16 | 3.55% | 113,090,563.50 | 4,534,582,971.11 | 2.49% | -48,257,225.54 | -4,114,765.05 | -1.06% | ||
Grand Total | 555,926,295,626.01 | 668,220,864,774.55 | 83.19% | 547,825,883,030.36 | 692,643,234,118.60 | 79.09% | -8,100,412,595.65 | 24,422,369,344.05 | -4.10% |
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 and December 31, 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.
Hi David,
ReplyDeleteI'm trying to look for a bank for a retirement fund. What financial ratios are the most important to look at? I have the annual reports of a few banks I'm interested in yet I'm not sure if I'm analysing them correctly. Also, will you know how to use their credit ratings?
Thanks!
I generally look at three areas: financial strength, liquidity, and Return on Equity. BSP often uses Capital Adequacy Ratio (CAR) as a measure of financial strength. Check out: http://bancofilipinofailure.blogspot.com/2012/05/capital-adequacy-ratios-of-philippine.html
DeleteI personally favor a variant of the Texas Ratio because it tends to capture the credit worthiness of a bank.
http://bancofilipinofailure.blogspot.com/2012/07/philippine-commercial-banks-improve.html
I also use various liquidity ratios. Check out: http://bancofilipinofailure.blogspot.com/2012/04/banco-filipinos-parallels-with-urban.html
For ROE, check out www.bsp.gov.ph
is that your real photo david?, if so you look like Obama and bush
ReplyDelete