Among Listed Philippine Banks, PNB Takes the Gold in 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: "Among Listed Philippine Banks, Philippine Savings Bank Reaches Borderline Insolvency" dated April 9, 2011.

Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets increased by PhP 4.102 billion or 1.07% from December 31, 2011 to March 31, 2012.  This was offset by an increase of PhP 36.353 billion  or 6.73% 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 3.77% from 71.05% as of December 31, 2011 to 67.20% as of March 31, 2012.

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 National Bank (PNB), had a borderline insolvency ratio of 163.35% as of March 31, 2012, up 15.59% from 147.76% as of December 31, 2011.  Although Total Distressed Assets declined by PhP 592.898 million, its Total Capital Cushion declined even more, by PhP 4.338 billion in the first quarter of 2012.  As a result, its ratio of Total Distressed Assets over its Total Capital Cushion increased by 10.55 percentage points to reach 163.35% in the first quarter of 2012 from 147.76% as of December 31, 2011.

It should be noted that PNB's impending merger with Allied Bank should improve the bank's finances and operating margin. (See: "PNB, Allied Expect P1-B Savings from Merger in 2nd Quarter") The merger, which is expected to take place in the second quarter of 2012 has been approved by the stockholders of both banks and is awaiting final approval from the BSP/MB and other regulatory authorities.  (See: "No more legal bar to PNB-Allied merger").

A bank that exhibited a significant increase in its insolvency ratios was:

1. CityState Savings Bank, which increased from a ratio of 22.75% as December 31, 2011 to 34.20% as of March 31, 2012.  This represents an increase of 11.45% or 50.36 percentage points.

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

1. Philippine Savings Bank, which dropped from a borderline insolvent ratio of 105.18% as of December 31, 2011 to 81.15% as of March 31, 2012
2. Security Bank Corporation, which dropped from 47.14% as of December 31, 2011 to 37.80% as of March 31, 2012
3. Bank of the Philippine Islands, which dropped from 63.71% as of December 31, 2011 to 51.34% as of March 31, 2012
4. East West Banking Corporation, which dropped from 68.36% as of December 31, 2011 to 56.41% as of March 31, 2012

The study does not include figures for one bank, namely:

1. Export and Industry Bank, which collapsed on April 26, 2012 and had the highest borderline insolvency ratio among Philippine Commercial Banks of 1476.07% as of September 30, 2011 - its latest available financial statements;  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"

The Published Statements of Condition as of December 31, 2011 and March 31, 2012 for Export and Industry Bank was unavailable.

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
December 31, 2011 to March 31, 2012
	December 31, 2011	March 31, 2012	Variance	% Variance
CityState Savings Bank	22.75%	34.20%	11.45%	50.36%
Philippine National Bank	147.76%	163.35%	15.59%	10.55%
Rizal Commercial Banking Corporation	64.70%	69.50%	4.80%	7.42%
Metropolitan Bank & Trust Company	62.99%	66.05%	3.05%	4.85%
Union Bank of the Philippines	85.31%	84.91%	-0.41%	-0.47%
Banco de Oro Unibank	59.90%	58.25%	-1.65%	-2.76%
Philippine Trust Company	55.45%	51.82%	-3.63%	-6.55%
China Banking Corporation	57.42%	53.10%	-4.32%	-7.52%
Allied Banking Corporation	71.45%	66.02%	-5.43%	-7.60%
East West Banking Corporation	68.36%	56.41%	-11.94%	-17.47%
Bank of the Philippine Islands	63.71%	51.34%	-12.37%	-19.42%
Security Bank Corporation	47.14%	37.80%	-9.34%	-19.80%
Philippine Savings Bank	105.18%	81.15%	-24.03%	-22.85%
Grand Total	71.05%	67.28%	-3.77%	-5.30%

Source: www.bsp.gov.ph and www.pse.com.ph

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
December 31, 2011 to March 31, 2012
	December 31, 2011				March 31, 2012				Variance				% Variance
	Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion
	(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)
Philippine National Bank	61,539,362,228.07	41,647,300,624.97	147.76%		60,946,464,001.47	37,309,439,614.75	163.35%		-592,898,226.60	-4,337,861,010.22	15.59%		-0.96%	-10.42%	10.55%
Union Bank of the Philippines	38,822,563,049.10	45,506,545,040.66	85.31%		38,760,712,790.01	45,650,885,590.93	84.91%		-61,850,259.09	144,340,550.27	-0.41%		-0.16%	0.32%	-0.47%
Philippine Savings Bank	14,651,257,542.20	13,929,160,698.54	105.18%		13,601,325,210.06	16,759,739,786.84	81.15%		-1,049,932,332.14	2,830,579,088.30	-24.03%		-7.17%	20.32%	-22.85%
Rizal Commercial Banking Corporation	24,131,710,175.80	37,298,479,029.45	64.70%		26,600,710,113.13	38,273,962,830.12	69.50%		2,468,999,937.33	975,483,800.67	4.80%		10.23%	2.62%	7.42%
Metropolitan Bank & Trust Company	63,787,741,208.04	101,261,532,842.48	62.99%		65,533,760,882.97	99,222,043,905.63	66.05%		1,746,019,674.93	-2,039,488,936.85	3.05%		2.74%	-2.01%	4.85%
Allied Banking Corporation	13,475,330,400.74	18,859,833,076.12	71.45%		13,399,669,031.53	20,296,906,255.80	66.02%		-75,661,369.21	1,437,073,179.68	-5.43%		-0.56%	7.62%	-7.60%
Banco de Oro Unibank	65,154,415,706.61	108,776,275,232.51	59.90%		69,886,800,878.72	119,983,815,083.47	58.25%		4,732,385,172.11	11,207,539,850.96	-1.65%		7.26%	10.30%	-2.76%
East West Banking Corporation	7,972,097,612.88	11,662,142,632.92	68.36%		8,685,415,309.09	15,395,752,915.64	56.41%		713,317,696.21	3,733,610,282.72	-11.94%		8.95%	32.01%	-17.47%
China Banking Corporation	23,774,532,770.51	41,406,720,599.32	57.42%		22,076,228,426.80	41,575,673,227.32	53.10%		-1,698,304,343.71	168,952,628.00	-4.32%		-7.14%	0.41%	-7.52%
Philippine Trust Company	8,112,568,190.46	14,631,348,671.35	55.45%		8,561,718,369.96	16,523,217,254.71	51.82%		449,150,179.50	1,891,868,583.36	-3.63%		5.54%	12.93%	-6.55%
Bank of the Philippine Islands	50,047,779,686.11	78,556,544,290.98	63.71%		47,321,213,011.00	92,180,981,372.00	51.34%		-2,726,566,675.11	13,624,437,081.02	-12.37%		-5.45%	17.34%	-19.42%
Security Bank Corporation	12,289,009,897.96	26,070,438,913.08	47.14%		12,390,822,425.97	32,777,702,285.12	37.80%		101,812,528.01	6,707,263,372.04	-9.34%		0.83%	25.73%	-19.80%
CityState Savings Bank	183,238,709.70	805,583,903.62	22.75%		278,638,718.52	814,736,342.62	34.20%		95,400,008.82	9,152,439.00	11.45%		52.06%	1.14%	50.36%
Grand Total	383,941,607,178.18	540,411,905,556.00	71.05%		388,043,479,169.23	576,764,856,464.95	67.28%		4,101,871,991.05	36,352,950,908.95	-3.77%		1.07%	6.73%	-5.30%

Source: www.bsp.gov.ph and www.pse.com.ph



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 and March 31, 2012 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.