Philippine Commercial Banks Show Improvement at Year End 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: 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:

1. Internationale Nederlanden Groep BK (36.28% decrease)
2. BDO Private Bank, Inc. (29.85% decrease)
3. Maybank Philippines Inc. (25.23% decrease)
4. HongKong and Shanghai Banking Corporation (22.82% decrease)
5. Union Bank of the Philippines (15.31% decrease)

The banks that exhibited significant deterioration in this ratio include:

1. Asia United Bank Corporation (32.21% increase)
2. East West Banking Corporation (27.38% increase)

Distressed Banks

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:

1. United Coconut Planters Bank (6.30% increase)
2. Philippine Bank of Communications (5.18% increase)
3. Philippine Veterans Bank (3.13% increase)

Two of the banks classified as distressed in the 4th Qtr. of 2011 showed a decline in their distressed ratios.  These are:

1. Philippine National Bank (13.50% decrease)
2. Bank of Commerce (8.92% decrease)

A third, Union Bank of the Philippines, which was classified as just barely distressed in the 3rd Qtr. of 2011 (with a distressed ratio of 100.73%), dropped out of the distressed list with a ratio of 85.31% in the 4th Qtr. of 2011.

All the banks that were flagged as borderline insolvent (highlighted in yellow) as of September 30, 2011, with the exception of the Union Bank of the Philippines, remain borderline insolvent as of December 31, 2011.  However, as a group the distressed banks showed some improvement in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 218.34% as of December 31, 2011, down from 236.86% as of September 30, 2011.

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.