Last July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged banks that continue to reflect unbooked losses or "deferred charges" on their balance sheets, to charge those losses against retained earnings. This implies that the BSP now considers that these banks have amassed so much in retained earnings that "they can now afford to absorb higher charges without impairing their capital and also without making their shareholders unhappy."
But can these banks do so? The answer is: yes and no. The banks with unbooked losses have the Stockholders Equity to absorb the unbooked losses but they may not necessarily have the Retained Earnings against which they can charge their unbooked losses. As can be seen from the table below, all eight thrift banks which have unbooked losses have the Stockholders Equity (SE) to absorb these Deferred Charges:
- Planters Development Bank (Deferred Charges of 16.88% of SE)
- Bataan Development Bank (Deferred Charges of 16,13% of SE)
- Citibank Savings, Inc. (Deferred Charges of 15.41% of SE)
- Card SME Bank, Inc. A Thrift Bank (Deferred Charges of 4.32% of SE)
- Legazpi Savings Bank (Deferred Charges of 2.99% of SE)
- Wealth Development Bank Corporation (Deferred Charges of 2.35% of SE)
- Farmers Savings and Loan Bank, Inc. (Deferred Charges of 0.33% of SE)
- Premiere Development Bank (Deferred Charges of 0.19% of SE)
- Planters Development Bank
- Bataan Development Bank
- Citibank Savings, Inc.
- Legazpi Savings Bank
- Farmers Savings and Loan Bank, Inc.
Fortunately, the amount of the Deferred Charges of these banks relative to their Stockholders Equity is not enough to impair 25% or more of their respective levels of Stockholders Equity.
Retained Earnings
Of the banks with Deferred Charges, only three banks have sufficient Retained Earnings (RE) to absorb their unbooked losses:
- Planters Development Bank (Deferred Charges of 29.42% of RE)
- Wealth Development Bank Corporation (Deferred Charges of 13.87% of RE)
- Farmers Savings and Loan Bank, Inc. (Deferred Charges of 1.06% of RE)
Four of the banks with Deferred Charges have negative Retained Earnings. As such, they do not have Retained Earnings against which they can book the Deferred Charges.
- Premiere Development Bank (Retained Earnings of - PhP 515.03 million versus PhP 1.60 million of Deferred Charges)
- Legazpi Savings Bank (Retained Earnings of - PhP 58.00 million versus PhP 5.17 million of Deferred Charges)
- Card SME Bank, Inc. A Thrift Bank (Retained Earnings of - PhP 31.47 million versus PhP 6.00 million of Deferred Charges)
- Citibank Savings, Inc. (Retained Earnings of - PhP 240.06 million versus PhP 277.18 million of Deferred Charges)
For more information of these Deferred Charges, please consult two previous blog posts: "Philippine Thrift Banks with Overstated Capital as of Year End 2011" and "BSP's Ampaw Accounting System"
| Philippine Thrift Banking System | ||||
| Deferred Charges Not Yet Written Down | ||||
| Impact on Stockholders Equity | ||||
| In PhP | ||||
| March 31, 2012 | ||||
| Bank | Unbooked Losses | SE | Adjusted SE | Impact on SE |
| Planters Development Bank | 661,822,246.65 | 3,920,909,645.00 | 3,259,087,398.35 | 16.88% |
| Bataan Development Bank | 10,559,565.48 | 65,446,206.19 | 54,886,640.71 | 16.13% |
| Citibank Savings, Inc. | 277,181,637.11 | 1,799,145,045.30 | 1,521,963,408.19 | 15.41% |
| Card SME Bank, Inc. A Thrift Bank | 5,999,370.47 | 138,744,999.64 | 132,745,629.17 | 4.32% |
| Legazpi Savings Bank | 5,174,507.83 | 173,319,038.83 | 168,144,531.00 | 2.99% |
| Wealth Development Bank Corporation | 8,307,421.63 | 354,141,083.95 | 345,833,662.32 | 2.35% |
| Farmers Savings and Loan Bank, Inc. | 332,049.10 | 100,352,191.63 | 100,020,142.53 | 0.33% |
| Premiere Development Bank | 1,603,253.59 | 845,279,683.32 | 843,676,429.73 | 0.19% |
| Allied Savings Bank | 0.00 | 987,645,539.61 | 987,645,539.61 | 0.00% |
| Bank One Savings and Trust Corporation | 0.00 | 518,419,074.37 | 518,419,074.37 | 0.00% |
| Bataan Savings and Loan Bank | 0.00 | 77,097,040.24 | 77,097,040.24 | 0.00% |
| BDO Elite Savings Bank, Inc. | 0.00 | 1,517,415,448.05 | 1,517,415,448.05 | 0.00% |
| BPI Direct Savings Bank, Inc. | 0.00 | 763,157,359.01 | 763,157,359.01 | 0.00% |
| BPI Family Savings Bank, Inc. | 0.00 | 14,617,984,246.39 | 14,617,984,246.39 | 0.00% |
| BPI Globe BanKO, Inc., A Savings Bank | 0.00 | 393,971,372.51 | 393,971,372.51 | 0.00% |
| Business and Consumers Bank (A Development Bank) | 0.00 | 77,748,458.93 | 77,748,458.93 | 0.00% |
| Century Savings Bank Corporation | 0.00 | 879,562,849.66 | 879,562,849.66 | 0.00% |
| China Bank Savings, Inc. | 0.00 | 1,619,129,099.96 | 1,619,129,099.96 | 0.00% |
| CityState Savings Bank | 0.00 | 772,556,569.69 | 772,556,569.69 | 0.00% |
| Cordillera Savings Bank, Inc. | 0.00 | 10,113,587.12 | 10,113,587.12 | 0.00% |
| Dumaguete City Development Bank, Inc. | 0.00 | 207,515,182.97 | 207,515,182.97 | 0.00% |
| Dungganon Bank (A Microfinance Thrift Bank), Inc. | 0.00 | 61,749,945.43 | 61,749,945.43 | 0.00% |
| Equicom SB | 0.00 | 432,119,691.61 | 432,119,691.61 | 0.00% |
| First Consolidated Bank, Inc. (A Private Development Bank) | 0.00 | 1,653,083,532.55 | 1,653,083,532.55 | 0.00% |
| GSIS Family Bank, A Thrift Bank | 0.00 | 401,931,908.84 | 401,931,908.84 | 0.00% |
| Hiyas Banking Corporation | 0.00 | 149,483,191.62 | 149,483,191.62 | 0.00% |
| HSBC Savings Bank (Phils), Inc. | 0.00 | 2,847,092,239.48 | 2,847,092,239.48 | 0.00% |
| Iloilo City Development Bank | 0.00 | 62,806,972.17 | 62,806,972.17 | 0.00% |
| Isla Bank (A Thrift Bank), Inc. | 0.00 | 629,321,990.07 | 629,321,990.07 | 0.00% |
| Lemery Savings and Loan Bank, Inc. | 0.00 | 68,848,130.94 | 68,848,130.94 | 0.00% |
| Liberty Savings Bank Inc. | 0.00 | 61,922,602.42 | 61,922,602.42 | 0.00% |
| Life Savings Bank, Inc. | 0.00 | 64,102,933.58 | 64,102,933.58 | 0.00% |
| Luzon Development Bank | 0.00 | 370,737,828.34 | 370,737,828.34 | 0.00% |
| Malasiqui Progressive Savings and Loan Bank, Inc. | 0.00 | 48,564,992.43 | 48,564,992.43 | 0.00% |
| Malayan Bank Savings and Mortgage Bank Inc. | 0.00 | 982,515,401.01 | 982,515,401.01 | 0.00% |
| Maritime Savings Bank Corporation | 0.00 | 65,802,946.73 | 65,802,946.73 | 0.00% |
| Merchant Savings and Loan Association, Inc. | 0.00 | 667,880,995.02 | 667,880,995.02 | 0.00% |
| Metro-Cebu Public Savings Bank | 0.00 | 54,922,883.27 | 54,922,883.27 | 0.00% |
| Microfinance Maximum Savings Bank, Inc. | 0.00 | 62,002,432.47 | 62,002,432.47 | 0.00% |
| Northpoint Development Bank, Inc. | 0.00 | 52,023,493.41 | 52,023,493.41 | 0.00% |
| Opportunity Kauswagan Bank, Inc. (A Microfinance Thrift Bank) | 0.00 | 117,858,658.51 | 117,858,658.51 | 0.00% |
| Optimum Development Bank, Inc. | 0.00 | 652,901,155.55 | 652,901,155.55 | 0.00% |
| Pacific Ace Savings Bank, Inc. | 0.00 | 70,624,398.54 | 70,624,398.54 | 0.00% |
| Pampanga Development Bank | 0.00 | 106,872,536.64 | 106,872,536.64 | 0.00% |
| Penbank, Inc. (A Private Development Bank) | 0.00 | 228,646,823.84 | 228,646,823.84 | 0.00% |
| Philippine Business Bank, Inc., A Savings Bank | 0.00 | 3,750,348,197.36 | 3,750,348,197.36 | 0.00% |
| Philippine Postal Savings Bank, Inc. | 0.00 | 683,228,724.70 | 683,228,724.70 | 0.00% |
| Philippine Resources Savings Banking Corporation (PR Savings Bank) | 0.00 | 1,089,509,149.18 | 1,089,509,149.18 | 0.00% |
| Philippine Savings Bank | 0.00 | 13,683,325,630.74 | 13,683,325,630.74 | 0.00% |
| Pride Star Development Bank, Inc. | 0.00 | 67,010,048.38 | 67,010,048.38 | 0.00% |
| Producer Savings Bank | 0.00 | 681,981,328.29 | 681,981,328.29 | 0.00% |
| Progress Savings and Loan Bank, Inc. | 0.00 | 84,391,315.66 | 84,391,315.66 | 0.00% |
| Queen City Development Bank, Inc. | 0.00 | 675,634,494.65 | 675,634,494.65 | 0.00% |
| Quezon Coconut Producers Savings and Loan Bank | 0.00 | 57,274,432.58 | 57,274,432.58 | 0.00% |
| RCBC Savings Bank Inc. | 0.00 | 7,309,933,773.22 | 7,309,933,773.22 | 0.00% |
| Sampaguita Savings Bank, Inc. | 0.00 | 65,261,993.42 | 65,261,993.42 | 0.00% |
| Sterling Bank of Asia, Inc. | 0.00 | 1,555,929,519.71 | 1,555,929,519.71 | 0.00% |
| Sun Savings Bank, Inc. | 0.00 | 73,461,155.22 | 73,461,155.22 | 0.00% |
| The Real Ban (A Thrift Bank), Inc. | 0.00 | 414,214,190.12 | 414,214,190.12 | 0.00% |
| Tong Yang Savings Bank, Inc. | 0.00 | 400,651,248.02 | 400,651,248.02 | 0.00% |
| Tower Development Bank | 0.00 | 110,988,323.96 | 110,988,323.96 | 0.00% |
| UCPB Savings Bank | 0.00 | 2,046,424,765.25 | 2,046,424,765.25 | 0.00% |
| United Overseas Bank Philippines | 0.00 | 700,036,768.10 | 700,036,768.10 | 0.00% |
| University Savings Bank, Inc. | 0.00 | 200,721,237.52 | 200,721,237.52 | 0.00% |
| Village Bank, Inc. (A Thrift Bank) | 0.00 | 70,608,657.40 | 70,608,657.40 | 0.00% |
| World Partners Bank (A Thrift Bank) | 0.00 | 158,061,330.50 | 158,061,330.50 | 0.00% |
| Grand Total | 970,980,051.86 | 73,632,467,690.82 | 72,661,487,638.96 | 1.32% |
Source: www.bsp.gov.ph
| Philippine Thrift Banking System | ||||
| Deferred Charges Not Yet Written Down | ||||
| Impact on Retained Earnings | ||||
| In PhP | ||||
| March 31, 2012 | ||||
| Bank | Unbooked Losses | Retained Earnings | Adjusted RE | Impact on RE |
| Bataan Development Bank | 10,559,565.48 | 8,373,562.98 | -2,186,002.50 | 126.11% |
| Planters Development Bank | 661,822,246.65 | 2,249,770,217.19 | 1,587,947,970.54 | 29.42% |
| Wealth Development Bank Corporation | 8,307,421.63 | 59,884,213.54 | 51,576,791.91 | 13.87% |
| Farmers Savings and Loan Bank, Inc. | 332,049.10 | 31,376,515.07 | 31,044,465.97 | 1.06% |
| Premiere Development Bank | 1,603,253.59 | -515,033,432.48 | -516,636,686.07 | -0.31% |
| Legazpi Savings Bank | 5,174,507.83 | -57,989,375.39 | -63,163,883.22 | -8.92% |
| Card SME Bank, Inc. A Thrift Bank | 5,999,370.47 | -31,473,888.59 | -37,473,259.06 | -19.06% |
| Citibank Savings, Inc. | 277,181,637.11 | -240,056,634.12 | -517,238,271.23 | -115.47% |
Source: www.bsp.gov.ph
How can the regulators allow banks with negative equity to continue to accept public deposits.
ReplyDeleteI apologize for the late reply but this is a difficult question to answer. Who knows what goes on in the minds of regulators? One can only speculate. In the case of Banco Filipino, regulators allowed the bank to pile on losses for years because they feared personal harassment and litigation. See "System is Broken!" http://bancofilipinofailure.blogspot.com/2011/08/system-is-broken.html. If BSP had not given banks regulatory relief in 2003, many banks would not have off loaded their Non Performing Assets to SPVs and would have become "capital deficient" all at the same time. That would have undermined the confidence of the general public in the banking system. See "BSP's Ampaw Accounting System" http://bancofilipinofailure.blogspot.com/2011/09/bsps-ampaw-accounting-system.html. This "regulatory relief" would supposedly allow banks to earn their way out of the mess they were in. The trouble with this approach is that, for many banks, it only postpones the problem or makes it bigger. Some banks were too far gone and should have been closed and/or merged with other stronger banks much earlier. For these weak banks, earning their way out meant adding more depositors and making higher yielding but even riskier loans. When these banks finally did close, even more depositors were hurt because the bank's deposit base was bigger.
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