Philippine Commercial Banks Show Further Improvement in the 1st Qtr. of 2012

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 Commercial Banks increased by PhP 5.1 billion or 0.94% from December 31, 2011 to March 31, 2012.  This increase was offset by a 6.66% increase in their Total Capital Cushion during the same period.  As a result, the Ratio of Total Distressed Assets to Total Capital Cushion of Philippine Commercial Banks decreased by 4.24%, from 79.09% as of December 31, 2011 to 74.85% as of March 31, 2012.  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. United Coconut Planters Bank (35.83% decrease)
2. HongKong & Shanghai Banking Corporation (22.75% decrease)
3. Security Bank Corporation (19.80% decrease)
4. Bank of the Philippine Islands (19.42% decrease)
5. Asia United Bank (19.03% decrease)
6. Maybank Philippines (18.76% decrease)
7. East West Banking Corporation (17.47% decrease)

The banks that exhibited significant deterioration in this ratio include:

1. Internationale Nederlanden Groep BK (510.55% increase)
2. BDO Private Bank (33.13% 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 1st Qtr. of  2012.

United Coconut Planters Bank continues to rank as the most distressed commercial bank in the country.  Its Total Distressed Assets are more than six times its Total Capital Cushion.  It must be noted that this ratio is down significantly from year-end 2011, when its Total Distressed Assets were ten times its Total Capital Cushion. Only one bank ranked as distressed in the 4th Qtr. of 2011 showed a deterioration in their distressed ratios as of March 31, 2012.  This bank, namely Philippine Bank of Communications, showed a 10.87% increase in its distressed ratio.

All the banks that were flagged as borderline insolvent (highlighted in yellow) as of December 31, 2011 remain borderline insolvent as of March 31, 2012.  However, as a group the distressed banks showed some improvement in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 209.98% as of March 31, 2012, down from 218.34% as of December 31, 2011.

Philippine Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
December 31, 2011 to March 31, 2012
In PhP
Bank	December 31, 2011	March 31, 2012	Variance	% Variance
Internationale Nederlanden Groep BK	11.35%	69.30%	57.95%	510.55%
BDO Private Bank, Inc.	2.49%	3.32%	0.83%	33.13%
Philippine Bank of Communications	160.10%	177.50%	17.40%	10.87%
Rizal Commercial Banking Corporation	64.70%	69.50%	4.80%	7.42%
Metropolitan Bank & Trust Company	62.99%	66.05%	3.05%	4.85%
Al-Amanah Islamic Bank of the Philippines	15.47%	15.47%	0.00%	0.00%
Philippine National Bank	147.76%	147.39%	-0.37%	-0.25%
Bank of Commerce	162.20%	161.68%	-0.52%	-0.32%
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%
Development Bank of the Philippines	49.44%	47.23%	-2.21%	-4.47%
Land Bank of the Philippines	65.30%	61.63%	-3.67%	-5.61%
Philippine Trust Company	55.45%	51.82%	-3.63%	-6.55%
China Banking Corporation	57.42%	53.10%	-4.32%	-7.52%
Philippine Veterans Bank	195.56%	180.74%	-14.82%	-7.58%
Allied Banking Corporation	71.45%	66.02%	-5.43%	-7.60%
Robinsons Bank Corporation	22.46%	20.50%	-1.96%	-8.73%
Chinatrust (Philippines) Commercial Banking Corporation	18.43%	16.53%	-1.90%	-10.30%
East West Banking Corporation	68.36%	56.41%	-11.94%	-17.47%
Maybank Philippines Inc.	51.65%	41.96%	-9.69%	-18.76%
Asia United Bank Corporation	62.14%	50.32%	-11.82%	-19.03%
Bank of the Philippine Islands	63.71%	51.34%	-12.37%	-19.42%
Security Bank Corporation	47.14%	37.80%	-9.34%	-19.80%
HongKong & Shanghai Banking Corporation	71.76%	55.44%	-16.33%	-22.75%
United Coconut Planters Bank	1003.58%	643.97%	-359.61%	-35.83%
Group Total	79.09%	74.85%	-4.24%	-5.36%
Source: www.bsp.gov.ph

Philippine Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
December 31, 2011 to March 31, 2012
In PhP
		December 31, 2011				March 31, 2012				Variance				% 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 %)		Total Distressed Assets (In %)	Total Capital Cushion (In %)	Distressed Assets/ Total Capital Cushion (In %)
United Coconut Planters Bank	58,210,111,052.92	5,800,229,638.98	1003.58%		58,346,163,511.76	9,060,379,410.73	643.97%		136,052,458.84	3,260,149,771.75	-359.61%		0.23%	56.21%	-35.83%
Philippine Veterans Bank	11,261,881,811.07	5,758,728,657.92	195.56%		11,386,593,846.84	6,300,066,206.28	180.74%		124,712,035.77	541,337,548.36	-14.82%		1.11%	9.40%	-7.58%
Philippine Bank of Communications	9,471,188,959.63	5,915,638,902.18	160.10%		9,605,657,632.92	5,411,642,825.75	177.50%		134,468,673.29	-503,996,076.43	17.40%		1.42%	-8.52%	10.87%
Bank of Commerce	32,929,553,535.88	20,301,508,621.47	162.20%		32,940,752,605.77	20,373,765,341.59	161.68%		11,199,069.89	72,256,720.12	-0.52%		0.03%	0.36%	-0.32%
Philippine National Bank	61,539,362,228.07	41,647,300,624.97	147.76%		60,946,464,001.47	41,349,439,614.75	147.39%		-592,898,226.60	-297,861,010.22	-0.37%		-0.96%	-0.72%	-0.25%
Union Bank of the Philippines	38,822,563,049.10	45,506,545,040.66	85.31%		38,760,712,790.01	45,650,885,590.92	84.91%		-61,850,259.09	144,340,550.26	-0.41%		-0.16%	0.32%	-0.47%
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%
Internationale Nederlanden Groep BK	623,286,587.93	5,491,404,385.19	11.35%		1,834,533,107.88	2,647,280,603.37	69.30%		1,211,246,519.95	-2,844,123,781.82	57.95%		194.33%	-51.79%	510.55%
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%		13,399,669,031.50	20,296,906,255.80	66.02%		-75,661,369.24	1,437,073,179.68	-5.43%		-0.56%	7.62%	-7.60%
Land Bank of the Philippines	33,266,907,399.89	50,944,842,479.97	65.30%		33,900,145,235.73	55,001,642,722.05	61.63%		633,237,835.84	4,056,800,242.08	-3.67%		1.90%	7.96%	-5.61%
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%
HongKong & Shanghai Banking Corporation	3,990,058,443.49	5,560,159,799.26	71.76%		3,000,103,881.92	5,411,909,952.04	55.44%		-989,954,561.57	-148,249,847.22	-16.33%		-24.81%	-2.67%	-22.75%
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%		47,321,213,011.63	92,180,981,372.08	51.34%		-2,726,566,674.48	13,624,437,081.10	-12.37%		-5.45%	17.34%	-19.42%
Asia United Bank Corporation	5,941,452,139.74	9,561,736,538.00	62.14%		5,288,994,151.41	10,511,663,015.14	50.32%		-652,457,988.33	949,926,477.14	-11.82%		-10.98%	9.93%	-19.03%
Development Bank of the Philippines	17,694,996,122.18	35,788,905,692.76	49.44%		17,008,446,193.85	36,008,144,271.63	47.23%		-686,549,928.33	219,238,578.87	-2.21%		-3.88%	0.61%	-4.47%
Maybank Philippines Inc.	2,847,143,306.74	5,512,890,428.32	51.65%		3,037,504,931.61	7,239,824,313.81	41.96%		190,361,624.87	1,726,933,885.49	-9.69%		6.69%	31.33%	-18.76%
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%
Robinsons Bank Corporation	1,173,989,648.85	5,226,473,730.40	22.46%		1,144,879,604.03	5,584,142,208.47	20.50%		-29,110,044.82	357,668,478.07	-1.96%		-2.48%	6.84%	-8.73%
Chinatrust (Philippines) Commercial Banking Corporation	1,112,691,065.96	6,036,104,571.35	18.43%		1,049,304,240.66	6,346,182,232.09	16.53%		-63,386,825.30	310,077,660.74	-1.90%		-5.70%	5.14%	-10.30%
Al-Amanah Islamic Bank of the Philippines	82,421,466.30	532,866,747.85	15.47%		82,421,466.30	532,866,747.85	15.47%		0.00	0.00	0.00%		0.00%	0.00%	0.00%
BDO Private Bank, Inc.	113,090,563.50	4,534,582,971.11	2.49%		168,810,398.09	5,084,420,800.74	3.32%		55,719,834.59	549,837,829.63	0.83%		49.27%	12.13%	33.13%
Group Total	547,825,883,030.36	692,643,234,118.60	79.09%		552,957,826,050.02	738,744,310,987.10	74.85%		5,131,943,019.66	46,101,076,868.50	-4.24%		0.94%	6.66%	-5.36%
Source: www.bsp.gov.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.