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Thursday, October 11, 2012

A Simple Stress Test of Philippine Thrift Banks as of March 31, 2012

Editor's Note: This is an updated version of an earlier blog post entitled: "A Simple Stress Test of Philippine Thrift Banks".


In an April 9, 2012 article entitled "Stress Test Proves Strength of PH Banks", "Philippine banks are seen to survive a disaster in which the various lenders are forced to write off loans as large as PhP 36 billion without asking shareholders, the central bank, or the national government for bailout money."  This assertion stems from a recent stress test conducted by the Bangko Sentral ng Pilipinas (BSP) on all 55 regular and commercial and expanded license banks.

For Philippine Commercial Banks, these NPLs currently comprise PhP 77.655 billion or 10.43% of the PhP 744.646 billion in Stockholders Equity as of March 31, 2012.  So, writing off 50% of the Philippine Commercial Banking NPLs would reduce their aggregate stockholders equity by a little more than 5%. (See "A Simple Stress Test of Philippine Commercial Banks as of March 31, 2012"

For Philippine Thrift Banks, the NPL levels are much higher on a relative basis.  As of March 31, 2012, Philippine Thrift Bank NPLs amounted to PhP 23.795 billion or 32.28% of the PhP 73.723 billion of Stockholders Equity of the Philippine Thrift Banking System for the same period.  This is roughly three times the level of the Philippine Commercial Banking System.  As a consequence, Philippine Thrift Banks, as a whole, are much more vulnerable to a 50% NPL write-off, simply because the NPL levels are so much higher than that of Philippine Commercial Banks.

In a 50% write-off of NPLs would reduce the Stockholders Equity of Philippine Thrift Banks by around 16%.  Naturally, some banks would be more affected than others.  (Weak banks are highlighted in yellow).

One bank,Real Bank (A Thrift Bank) Inc., would experience a complete wipe-out of their stockholders equity.  Another, Citibank Savings Inc. would also experience a near wipe-out of its stockholders equity (76.96%).  Citibank Savings Inc. is the local subsidiary of a foreign bank and, as such, has little or no capital.  In a crisis, it would rely on its "home-host" arrangement wherein the mother ship (the foreign parent) sends more funds and/or capital when local regulators or counterparties require it.  Four other banks, namely, Bataan Development Bank (42.69% decline in SE), Planters Development Bank (33.23% decline in SE),  Metro Cebu Public Savings Bank (30.66% decline in SE), and Legazpi Savings Bank Inc., (30.50% decline in SE) would be severely affected.




Philippine Thrift Banking System
NPL as % of SE
March 31, 2012









NPL SE NPL/SE
Bank (In PHP) (In PHP) (In %)
Real Bank (A Thrift Bank) Inc. 3,765,789,651.56 414,214,190.12 909.14%
Citibank Savings Inc. 2,769,382,977.32 1,799,145,045.30 153.93%
Bataan Development Bank 55,883,066.20 65,446,206.19 85.39%
Planters Development Bank 2,605,828,697.04 3,920,909,645.00 66.46%
Metro Cebu Public Savings Bank 33,675,816.64 54,922,883.27 61.31%
Legazpi Savings Bank Inc. 105,733,016.17 173,319,038.83 61.00%
Philippine Postal Savings Bank 373,552,631.92 683,228,724.70 54.67%
Farmers Savings & Loan Bank 54,667,710.28 100,352,191.63 54.48%
GSIS Family Bank 206,827,346.00 401,931,908.84 51.46%
Premiere Development Bank 425,136,588.02 845,279,683.32 50.30%
Opportunity Microfinance Bank 57,661,348.16 117,858,658.51 48.92%
Village SLA, Inc. 33,232,754.61 70,608,657.40 47.07%
Sterling Bank of Asia Inc. 710,444,102.80 1,555,929,519.71 45.66%
Penbank, Inc. 82,271,097.52 228,646,823.84 35.98%
Pampanga Development Bank 37,140,866.10 106,872,536.64 34.75%
Equicom SB 147,544,963.23 432,119,691.61 34.14%
Malasiqui Progressive SLB, Inc. 15,323,442.43 48,564,992.43 31.55%
Philippine Savings Bank 4,274,021,576.49 13,683,325,630.74 31.24%
Hiyas Savings & Loan Bank 43,374,512.08 149,483,191.62 29.02%
Malayan Bank Savings & Mortgage Bank 279,922,116.91 982,515,401.01 28.49%
University Savings Bank 54,210,645.42 200,721,237.52 27.01%
BPI Family Savings Bank 3,703,163,427.58 14,617,984,246.39 25.33%
Lemery Savings & Loan Bank, Inc. 17,221,899.00 68,848,130.94 25.01%
First Consolidated Bank 410,408,113.83 1,653,083,532.55 24.83%
Allied Savings Bank 239,298,776.13 987,645,539.61 24.23%
Philippine Business Bank 854,700,162.63 3,750,348,197.36 22.79%
World Partners Bank (A Thrift Bank) 35,791,094.52 158,061,330.50 22.64%
Tong Yang Savings Bank Inc. 82,586,107.99 400,651,248.02 20.61%
Luzon Development Bank 75,726,127.85 370,737,828.34 20.43%
Wealth Bank - A Development Bank 68,732,190.20 354,141,083.95 19.41%
Iloilo City Development Bank 11,729,619.24 62,806,972.17 18.68%
Cordillera Savings Bank 18,379,048.41 101,135,879.12 18.17%
RCBC Savings Bank 1,264,344,221.16 7,309,933,773.22 17.30%
Quezon Coconut Producers SLB Inc. 9,810,798.00 57,274,432.58 17.13%
Business & Consumers Bank 12,397,298.82 77,748,458.93 15.95%
Producers Savings Bank 106,009,376.42 681,981,328.29 15.54%
Pridestar Development Bank 10,248,881.34 67,010,048.38 15.29%
Maritime SLA 9,853,227.34 65,802,946.73 14.97%
BPI Direct Savings Bank 113,996,292.61 763,157,359.01 14.94%
Pacific Ace Savings Bank 10,326,264.15 70,624,398.54 14.62%
Liberty Savings Bank 9,040,055.56 61,922,602.42 14.60%
Dumaguete City Development Bank 30,004,580.97 207,515,182.97 14.46%
BPI Globe Banko Inc. Savings Bank 54,482,702.37 393,971,372.51 13.83%
Northpoint Development Bank 6,750,426.34 52,023,493.41 12.98%
Sampaguita SLA 7,895,893.04 65,261,993.42 12.10%
Life Savings Bank 7,703,708.73 64,102,933.58 12.02%
Dungganon Bank 5,920,930.67 61,749,945.43 9.59%
UCPB Savings Bank 177,455,041.97 2,046,424,765.25 8.67%
Card SME Bank Inc. (A Thrift Bank) 10,948,415.35 138,744,999.64 7.89%
Sun Savings Bank 5,413,145.65 73,461,155.22 7.37%
Optimum Development Bank 35,340,843.52 652,901,155.55 5.41%
China Bank Savings 83,162,441.11 1,619,129,099.96 5.14%
Tower Development Bank 4,696,989.89 110,988,323.96 4.23%
CityState Savings Bank 29,602,271.16 772,556,569.69 3.83%
Microfinance Maximum SB (Maxbank) 1,916,477.62 62,002,432.47 3.09%
HSBC Savings Bank (Phils) Inc. 84,425,466.24 2,847,092,239.48 2.97%
Bank One Savings and Trust Corp. 14,606,272.53 518,419,074.37 2.82%
Bataan SLA 2,142,391.54 77,097,040.24 2.78%
The Queen City Development Bank 18,363,929.54 675,634,494.65 2.72%
Century Savings Bank 17,416,353.20 879,562,849.66 1.98%
Progress SLA 1,448,663.83 84,391,315.66 1.72%
Merchants Savings & Loan Association Inc. 430,465.95 667,880,995.02 0.06%
BDO Elite Savings Bank 0.00 1,517,415,448.05 0.00%
Isla Bank (A Thrift Bank) Inc. 0.00 629,321,990.07 0.00%
Philippine Resources Savings Banking Corporation 0.00 1,089,509,149.18 0.00%
United Overseas Bank Philippines 0.00 700,036,768.10 0.00%
City Savings Bank NA NA NA
Grand Total 23,795,515,320.90 73,723,489,982.82 32.28%


Source: www.bsp.gov.ph



Are NPLs the Right Numbers to Look At?

In a financial crisis, a loan that is current can very well become past due, and a past due loan can become a non-performing loan, and a non-performing loan can become a loan write-off.  The real number to look at are the loans that the banks and BSP already consider doubtful: Classified Loans.

Investopedia.com defines "Classified Loans" as:

"Any bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. Banks usually categorize such loans as adversely classified assets on their books."

The US Federal Deposit Insurance Corporation (FDIC), similar to our very own Philippine Deposit Insurance Corporation (PDIC), defines Classified Loans as:

"Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future."

It is not clear as to how the BSP defines Classified Loans but their definition should hew very closely to the FDIC's own definition. 

 As of March 31, 2012, "Classified Loans and Other Risky Assets" of the Philippine Thrift Banking System amounted to PhP 57.693 billion or almost 2.4 times the size of the thrift banking system NPLs of PhP 23.795 billion for the same period.  Consequently, any write-offs of Classified Loans will have almost three times the impact of an NPL write-off.

Editor's Note: It is important to note that the Classified Loans figure of PhP 57.693 billion is understated because City Savings Bank, which reported at least PhP 10 billion in Classified Loans as of December 31, 2012, did not have its March 31, 2012 Published Statement of Condition on the BSP website.  (See "City Savings Bank Takes Silver in Insolvency")




Philippine Thrift Banking System
Classified Loans vs. NPLs
March 31, 2012









Classified Loans NPLs Classified Loans/NPLs
Bank (In PHP) (In PHP) (In %)
Iloilo City Development Bank 242,399,068.33 11,729,619.24 2066.56%
Village SLA, Inc. 582,701,901.96 33,232,754.61 1753.40%
China Bank Savings 1,242,628,502.77 83,162,441.11 1494.22%
Tower Development Bank 46,031,156.41 4,696,989.89 980.01%
Business & Consumers Bank 107,283,662.58 12,397,298.82 865.38%
RCBC Savings Bank 9,577,290,000.00 1,264,344,221.16 757.49%
Dumaguete City Development Bank 204,759,000.00 30,004,580.97 682.43%
GSIS Family Bank 1,275,879,789.57 206,827,346.00 616.88%
University Savings Bank 271,260,429.88 54,210,645.42 500.38%
Legazpi Savings Bank Inc. 518,975,000.00 105,733,016.17 490.84%
UCPB Savings Bank 854,693,302.02 177,455,041.97 481.64%
CityState Savings Bank 122,386,192.55 29,602,271.16 413.44%
The Queen City Development Bank 68,472,858.57 18,363,929.54 372.87%
Wealth Bank - A Development Bank 215,915,549.97 68,732,190.20 314.14%
Tong Yang Savings Bank Inc. 253,677,261.82 82,586,107.99 307.17%
Malayan Bank Savings & Mortgage Bank 845,551,382.08 279,922,116.91 302.07%
Life Savings Bank 21,253,550.43 7,703,708.73 275.89%
Progress SLA 3,715,534.17 1,448,663.83 256.48%
Equicom SB 365,663,711.34 147,544,963.23 247.83%
Farmers Savings & Loan Bank 134,501,605.67 54,667,710.28 246.03%
Cordillera Savings Bank 42,743,683.43 18,379,048.41 232.57%
Producers Savings Bank 246,229,478.70 106,009,376.42 232.27%
Real Bank (A Thrift Bank) Inc. 8,643,990,728.30 3,765,789,651.56 229.54%
Philippine Savings Bank 9,724,567,942.17 4,274,021,576.49 227.53%
Opportunity Microfinance Bank 128,212,775.10 57,661,348.16 222.35%
Luzon Development Bank 155,945,146.41 75,726,127.85 205.93%
BPI Family Savings Bank 7,289,343,695.57 3,703,163,427.58 196.84%
Pampanga Development Bank 70,843,289.18 37,140,866.10 190.74%
Merchants Savings & Loan Association Inc. 795,000.00 430,465.95 184.68%
Bataan Development Bank 102,400,000.00 55,883,066.20 183.24%
Premiere Development Bank 749,358,711.80 425,136,588.02 176.26%
Maritime SLA 16,951,334.79 9,853,227.34 172.04%
Quezon Coconut Producers SLB Inc. 16,503,982.86 9,810,798.00 168.22%
Planters Development Bank 4,280,907,294.45 2,605,828,697.04 164.28%
Philippine Postal Savings Bank 612,840,000.00 373,552,631.92 164.06%
Metro Cebu Public Savings Bank 49,781,248.50 33,675,816.64 147.82%
Century Savings Bank 25,707,964.37 17,416,353.20 147.61%
Philippine Business Bank 1,184,818,220.39 854,700,162.63 138.62%
Allied Savings Bank 330,137,674.53 239,298,776.13 137.96%
First Consolidated Bank 551,159,327.81 410,408,113.83 134.30%
Liberty Savings Bank 12,005,630.66 9,040,055.56 132.80%
Sampaguita SLA 10,125,884.01 7,895,893.04 128.24%
Dungganon Bank 7,574,686.33 5,920,930.67 127.93%
HSBC Savings Bank (Phils) Inc. 101,615,255.20 84,425,466.24 120.36%
BPI Globe Banko Inc. Savings Bank 61,982,702.37 54,482,702.37 113.77%
BPI Direct Savings Bank 127,595,278.58 113,996,292.61 111.93%
Sterling Bank of Asia Inc. 759,230,533.00 710,444,102.80 106.87%
Lemery Savings & Loan Bank, Inc. 17,246,766.33 17,221,899.00 100.14%
Bank One Savings and Trust Corp. 14,606,272.53 14,606,272.53 100.00%
Bataan SLA 2,142,391.54 2,142,391.54 100.00%
Card SME Bank Inc. (A Thrift Bank) 10,948,415.35 10,948,415.35 100.00%
Hiyas Savings & Loan Bank 43,374,512.08 43,374,512.08 100.00%
Malasiqui Progressive SLB, Inc. 15,323,442.43 15,323,442.43 100.00%
Microfinance Maximum SB (Maxbank) 1,916,477.62 1,916,477.62 100.00%
Northpoint Development Bank 6,750,426.34 6,750,426.34 100.00%
Optimum Development Bank 35,340,843.52 35,340,843.52 100.00%
Penbank, Inc. 82,271,097.52 82,271,097.52 100.00%
Pridestar Development Bank 10,248,881.34 10,248,881.34 100.00%
Sun Savings Bank 5,413,145.65 5,413,145.65 100.00%
World Partners Bank (A Thrift Bank) 35,791,094.52 35,791,094.52 100.00%
Citibank Savings Inc. 2,696,040,487.36 2,769,382,977.32 97.35%
Pacific Ace Savings Bank 6,470,420.36 10,326,264.15 62.66%
BDO Elite Savings Bank 0.00 0.00 NA
Isla Bank (A Thrift Bank) Inc. 36,324,529.31 0.00 NA
Philippine Resources Savings Banking Corporation 1,501,638,574.17 0.00 NA
United Overseas Bank Philippines 913,307,472.30 0.00 NA
City Savings Bank NA NA NA
Grand Total 57,693,562,178.90 23,795,515,320.90 242.46%


Source: www.bsp.gov.ph


This level of classified loans should be measured against the bank's "capital cushion" or its ability to absorb losses.  Capital Cushion is normally defined as a bank's "Tangible Common Equity" plus its Loan Loss Reserves.  Tangible Common Equity (TCE) refers to the subset of shareholders' equity that is not preferred equity and not intangible assets.  So it excludes such items as Hybrid equity (like preferred shares) and goodwill.

By this measure, the level of "Classified Loans and other Risky Assets" amounts to 67.09% of the PhP 85.988 billion in Total Capital Cushion of Philippine Thrift Banks as of March 31, 2012.



Philippine Thrift Banking System
Classified Loans as % of Total Capital Cushion
March 31, 2012









Classified Loans Total Capital Cushion Classified Loans/Total Capital Cushion
Bank (In PHP) (In PHP) (In %)
Real Bank (A Thrift Bank) Inc. 8,643,990,728.30 825,587,293.41 1047.01%
Village SLA, Inc. 582,701,901.96 86,344,754.81 674.86%
Iloilo City Development Bank 242,399,068.33 65,272,215.10 371.37%
GSIS Family Bank 1,275,879,789.57 464,020,110.73 274.96%
Legazpi Savings Bank Inc. 518,975,000.00 188,812,023.99 274.86%
Bataan Development Bank 102,400,000.00 76,561,456.79 133.75%
Business & Consumers Bank 107,283,662.58 80,860,999.25 132.68%
Philippine Resources Savings Banking Corporation 1,501,638,574.17 1,212,811,159.39 123.81%
RCBC Savings Bank 9,577,290,000.00 7,861,976,886.63 121.82%
University Savings Bank 271,260,429.88 227,936,477.06 119.01%
Farmers Savings & Loan Bank 134,501,605.67 119,495,878.00 112.56%
China Bank Savings 1,242,628,502.77 1,173,665,055.26 105.88%
Dumaguete City Development Bank 204,759,000.00 206,193,126.17 99.30%
Planters Development Bank 4,280,907,294.45 4,452,573,423.58 96.14%
Opportunity Microfinance Bank 128,212,775.10 140,966,660.91 90.95%
Malayan Bank Savings & Mortgage Bank 845,551,382.08 1,075,379,215.98 78.63%
Philippine Postal Savings Bank 612,840,000.00 818,586,509.18 74.87%
Equicom SB 365,663,711.34 505,169,694.78 72.38%
United Overseas Bank Philippines 913,307,472.30 1,448,098,996.81 63.07%
Metro Cebu Public Savings Bank 49,781,248.50 82,461,425.57 60.37%
Citibank Savings Inc. 2,696,040,487.36 4,498,629,545.94 59.93%
Philippine Savings Bank 9,724,567,942.17 16,759,739,786.84 58.02%
Tong Yang Savings Bank Inc. 253,677,261.82 445,066,651.62 57.00%
Pampanga Development Bank 70,843,289.18 126,202,725.13 56.13%
Wealth Bank - A Development Bank 215,915,549.97 404,016,447.07 53.44%
Premiere Development Bank 749,358,711.80 1,427,802,395.52 52.48%
BPI Family Savings Bank 7,289,343,695.57 17,032,382,062.40 42.80%
Sterling Bank of Asia Inc. 759,230,533.00 1,841,699,407.90 41.22%
Tower Development Bank 46,031,156.41 112,678,828.58 40.85%
UCPB Savings Bank 854,693,302.02 2,203,418,599.36 38.79%
Producers Savings Bank 246,229,478.70 642,350,700.67 38.33%
Luzon Development Bank 155,945,146.41 444,071,923.87 35.12%
Cordillera Savings Bank 42,743,683.43 123,858,192.76 34.51%
Philippine Business Bank 1,184,818,220.39 3,522,480,360.07 33.64%
Allied Savings Bank 330,137,674.53 1,010,574,472.46 32.67%
Penbank, Inc. 82,271,097.52 254,791,038.35 32.29%
Life Savings Bank 21,253,550.43 66,138,275.39 32.14%
First Consolidated Bank 551,159,327.81 1,856,880,353.48 29.68%
Quezon Coconut Producers SLB Inc. 16,503,982.86 57,268,623.22 28.82%
Malasiqui Progressive SLB, Inc. 15,323,442.43 55,048,215.23 27.84%
Hiyas Savings & Loan Bank 43,374,512.08 164,731,409.03 26.33%
Maritime SLA 16,951,334.79 68,833,229.22 24.63%
Lemery Savings & Loan Bank, Inc. 17,246,766.33 70,929,116.35 24.32%
World Partners Bank (A Thrift Bank) 35,791,094.52 170,966,160.68 20.93%
Liberty Savings Bank 12,005,630.66 63,701,027.16 18.85%
BPI Direct Savings Bank 127,595,278.58 842,173,596.94 15.15%
CityState Savings Bank 122,386,192.55 814,736,342.62 15.02%
Pridestar Development Bank 10,248,881.34 71,093,548.88 14.42%
Sampaguita SLA 10,125,884.01 73,481,194.82 13.78%
Northpoint Development Bank 6,750,426.34 56,103,745.64 12.03%
BPI Globe Banko Inc. Savings Bank 61,982,702.37 524,444,707.32 11.82%
Dungganon Bank 7,574,686.33 64,443,329.59 11.75%
The Queen City Development Bank 68,472,858.57 691,016,996.13 9.91%
Pacific Ace Savings Bank 6,470,420.36 76,675,258.62 8.44%
Card SME Bank Inc. (A Thrift Bank) 10,948,415.35 150,765,995.91 7.26%
Sun Savings Bank 5,413,145.65 76,867,112.54 7.04%
Isla Bank (A Thrift Bank) Inc. 36,324,529.31 631,893,880.25 5.75%
Optimum Development Bank 35,340,843.52 687,108,808.57 5.14%
Progress SLA 3,715,534.17 84,802,928.79 4.38%
HSBC Savings Bank (Phils) Inc. 101,615,255.20 2,888,194,472.00 3.52%
Microfinance Maximum SB (Maxbank) 1,916,477.62 62,286,572.17 3.08%
Century Savings Bank 25,707,964.37 875,210,065.34 2.94%
Bank One Savings and Trust Corp. 14,606,272.53 523,963,118.72 2.79%
Bataan SLA 2,142,391.54 78,699,471.64 2.72%
Merchants Savings & Loan Association Inc. 795,000.00 669,331,235.75 0.12%
BDO Elite Savings Bank 0.00 1,507,557,562.16 0.00%
City Savings Bank NA NA NA
Grand Total 57,693,562,178.90 85,987,882,856.10 67.09%


Source: www.bsp.gov.ph


Stress Test Scenarios

Aggregate

So how will a 10%, 20%, 30%, 40%, and even 50% write-off of Classified Loans affect the Total Capital Cushion of the Philippine Thrift Banking System?

In the aggregate, if Classified Loans amount to 67.09% of the thrift banking system's Total Capital Cushion, then it follows that a 10% write-off of Classified Loans will reduce the total capital by 6.71% and a 50% write-off of classified loans will reduce the thrift banking system's Total Capital Cushion by 33.55%.

Individual Banks

A 10% write-off of Classified Loans would severely impact (by 30% or more) the Total Capital Cushion of  three banks (severely affected banks highlighted in yellow, banks that will experience an equity wipe-out hightlighted in red):

  1. Real Bank (A Thrift Bank) Inc. (104.70% reduction in Total Capital Cushion)
  2. Village SLA, Inc. (67.49% reduction in Total Capital Cushion)
  3. Iloilo City Development Bank (45.46% reduction in Total Capital Cushion)

A 20% write-off of Classified Loans will totally wipe out the Total Capital Cushion of two banks and severely impact the Total Capital Cushion of three more banks:

  1. Real Bank (A Thrift Bank) Inc. (209.40% reduction in Total Capital Cushion)
  2. Village SLA, Inc. (134.97% reduction in Total Capital Cushion)
  3. Iloilo City Development Bank (72.47% reduction in Total Capital Cushion)
  4. GSIS Family Bank (54.99% reduction in Total Capital Cushion)
  5. Legazpi Savings Bank Inc. (54.97% reduction in Total Capital Cushion)
A 30% write-off of Classified Loans will totally wipe out the Total Capital Cushion of three banks and severely affect (reduce by 30% or more) the Total Capital Cushion of nine more banks:
  1. Real Bank (A Thrift Bank) Inc. (314.10% reduction in Total Capital Cushion)
  2. Village SLA, Inc. (202.46% reduction in Total Capital Cushion)
  3. Iloilo City Development Bank (111.41% reduction in Total Capital Cushion)
  4. GSIS Family Bank (82.49% reduction in Total Capital Cushion)
  5. Legazpi Savings Bank Inc. (82.46% reduction in Total Capital Cushion)
  6. Bataan Development Bank (40.12% reduction in Total Capital Cushion)
  7. Business & Consumers Bank (39.80% reduction in Total Capital Cushion)
  8. Philippine Resources Savings Banking Corporation (37.14% reduction in Total Capital Cushion)
  9. RCBC Savings Bank (36.55% reduction in Total Capital Cushion)
  10. University Savings Bank (35.70% reduction in Total Capital Cushion)
  11. Farmers Savings & Loan Bank (33.77% reduction in Total Capital Cushion)
  12. China Bank Savings (31.76% reduction in Total Capital Cushion)

A 40% write-off of Classified Loans will totally wipe out the Total Capital Cushion of five banks and severely affect (reduce by 30% or more) the Total Capital Cushion of eleven more banks:
  1. Real Bank (A Thrift Bank) Inc. (418.80% reduction in Total Capital Cushion)
  2. Village SLA, Inc. (269.94% reduction in Total Capital Cushion)
  3. Iloilo City Development Bank (148.55% reduction in Total Capital Cushion)
  4. GSIS Family Bank (109.98% reduction in Total Capital Cushion)
  5. Legazpi Savings Bank Inc. (109.95% reduction in Total Capital Cushion)
  6. Bataan Development Bank (53.50% reduction in Total Capital Cushion)
  7. Business & Consumers Bank (53.07% reduction in Total Capital Cushion)
  8. Philippine Resources Savings Banking Corporation (49.53% reduction in Total Capital Cushion)
  9. RCBC Savings Bank (48.73% reduction in Total Capital Cushion)
  10. University Savings Bank (47.60% reduction in Total Capital Cushion)
  11. Farmers Savings & Loan Bank (45.02% reduction in Total Capital Cushion)
  12. China Bank Savings (42.35% reduction in Total Capital Cushion)
  13. Dumaguete City Development Bank (39.72% reduction in Total Capital Cushion)
  14. Planters Development Bank (38.46% reduction in Total Capital Cushion)
  15. Opportunity Microfinance Bank (36.38% reduction in Total Capital Cushion)
  16. Malayan Bank Savings & Mortgage Bank (31.45% reduction in Total Capital Cushion)


A 50% write-off of Classified Loans will totally wipe out the Total Capital Cushion of five banks and severely affect (reduce by 30% or more) the Total Capital Cushion of sixteen more banks:

  1. Real Bank (A Thrift Bank) Inc. (523.51% reduction in Total Capital Cushion)
  2. Village SLA, Inc. (337.43% reduction in Total Capital Cushion)
  3. Iloilo City Development Bank (185.68% reduction in Total Capital Cushion)
  4. GSIS Family Bank (137.48% reduction in Total Capital Cushion)
  5. Legazpi Savings Bank Inc. (137.43% reduction in Total Capital Cushion)
  6. Bataan Development Bank (66.87% reduction in Total Capital Cushion)
  7. Business & Consumers Bank (66.34% reduction in Total Capital Cushion)
  8. Philippine Resources Savings Banking Corporation (61.91% reduction in Total Capital Cushion)
  9. RCBC Savings Bank (60.91% reduction in Total Capital Cushion)
  10. University Savings Bank (59.50% reduction in Total Capital Cushion)
  11. Farmers Savings & Loan Bank (56.28% reduction in Total Capital Cushion)
  12. China Bank Savings (52.94% reduction in Total Capital Cushion)
  13. Dumaguete City Development Bank (49.64% reduction in Total Capital Cushion)
  14. Planters Development Bank (48.07% reduction in Total Capital Cushion)
  15. Opportunity Microfinance Bank (45.48% reduction in Total Capital Cushion)
  16. Malayan Bank Savings & Mortgage Bank (39.31% reduction in Total Capital Cushion)
  17. Philippine Postal Savings Bank (37.43% reduction in Total Capital Cushion)
  18. Equicom SB (36.19% reduction in Total Capital Cushion)
  19. United Overseas Bank Philippines ( 31.53% reduction in Total Capital Cushion)
  20. Metro Cebu Public Savings Bank (30.18% reduction in Total Capital Cushion)

Please bear in mind that a number of these banks are already very weak and are in distress.  See a previous blog post "Philippine Thrift Banks Continue to Improve in the First Quarter of 2012".  Moreover, their capital can be overstated.  See a previous blog post "Can Philippine Thrift Banks Charge Their Unbooked Losses Against Retained Earnings?".  As such, any reduction in their capital cushion could knock down an already weak bank.

Philippine Thrift Banking System
Classified Loans as % of Total Capital Cushion
March 31, 2012

















Classified Loans Total Capital Cushion Impact of 10% Loss on Total Capital Cushion Impact of 20% Loss on Total Capital Cushion Impact of 30% Loss on Total Capital Cushion Impact of 40% Loss on Total Capital Cushion Impact of 50% Loss on Total Capital Cushion
Bank (In PHP) (In PHP) (In %) (In %) (In %) (In %) (In %)
Real Bank (A Thrift Bank) Inc. 8,643,990,728.30 825,587,293.41 104.70% 209.40% 314.10% 418.80% 523.51%
Village SLA, Inc. 582,701,901.96 86,344,754.81 67.49% 134.97% 202.46% 269.94% 337.43%
Iloilo City Development Bank 242,399,068.33 65,272,215.10 37.14% 74.27% 111.41% 148.55% 185.68%
GSIS Family Bank 1,275,879,789.57 464,020,110.73 27.50% 54.99% 82.49% 109.98% 137.48%
Legazpi Savings Bank Inc. 518,975,000.00 188,812,023.99 27.49% 54.97% 82.46% 109.95% 137.43%
Bataan Development Bank 102,400,000.00 76,561,456.79 13.37% 26.75% 40.12% 53.50% 66.87%
Business & Consumers Bank 107,283,662.58 80,860,999.25 13.27% 26.54% 39.80% 53.07% 66.34%
Philippine Resources Savings Banking Corporation 1,501,638,574.17 1,212,811,159.39 12.38% 24.76% 37.14% 49.53% 61.91%
RCBC Savings Bank 9,577,290,000.00 7,861,976,886.63 12.18% 24.36% 36.55% 48.73% 60.91%
University Savings Bank 271,260,429.88 227,936,477.06 11.90% 23.80% 35.70% 47.60% 59.50%
Farmers Savings & Loan Bank 134,501,605.67 119,495,878.00 11.26% 22.51% 33.77% 45.02% 56.28%
China Bank Savings 1,242,628,502.77 1,173,665,055.26 10.59% 21.18% 31.76% 42.35% 52.94%
Dumaguete City Development Bank 204,759,000.00 206,193,126.17 9.93% 19.86% 29.79% 39.72% 49.65%
Planters Development Bank 4,280,907,294.45 4,452,573,423.58 9.61% 19.23% 28.84% 38.46% 48.07%
Opportunity Microfinance Bank 128,212,775.10 140,966,660.91 9.10% 18.19% 27.29% 36.38% 45.48%
Malayan Bank Savings & Mortgage Bank 845,551,382.08 1,075,379,215.98 7.86% 15.73% 23.59% 31.45% 39.31%
Philippine Postal Savings Bank 612,840,000.00 818,586,509.18 7.49% 14.97% 22.46% 29.95% 37.43%
Equicom SB 365,663,711.34 505,169,694.78 7.24% 14.48% 21.72% 28.95% 36.19%
United Overseas Bank Philippines 913,307,472.30 1,448,098,996.81 6.31% 12.61% 18.92% 25.23% 31.53%
Metro Cebu Public Savings Bank 49,781,248.50 82,461,425.57 6.04% 12.07% 18.11% 24.15% 30.18%
Citibank Savings Inc. 2,696,040,487.36 4,498,629,545.94 5.99% 11.99% 17.98% 23.97% 29.97%
Philippine Savings Bank 9,724,567,942.17 16,759,739,786.84 5.80% 11.60% 17.41% 23.21% 29.01%
Tong Yang Savings Bank Inc. 253,677,261.82 445,066,651.62 5.70% 11.40% 17.10% 22.80% 28.50%
Pampanga Development Bank 70,843,289.18 126,202,725.13 5.61% 11.23% 16.84% 22.45% 28.07%
Wealth Bank - A Development Bank 215,915,549.97 404,016,447.07 5.34% 10.69% 16.03% 21.38% 26.72%
Premiere Development Bank 749,358,711.80 1,427,802,395.52 5.25% 10.50% 15.75% 20.99% 26.24%
BPI Family Savings Bank 7,289,343,695.57 17,032,382,062.40 4.28% 8.56% 12.84% 17.12% 21.40%
Sterling Bank of Asia Inc. 759,230,533.00 1,841,699,407.90 4.12% 8.24% 12.37% 16.49% 20.61%
Tower Development Bank 46,031,156.41 112,678,828.58 4.09% 8.17% 12.26% 16.34% 20.43%
UCPB Savings Bank 854,693,302.02 2,203,418,599.36 3.88% 7.76% 11.64% 15.52% 19.39%
Producers Savings Bank 246,229,478.70 642,350,700.67 3.83% 7.67% 11.50% 15.33% 19.17%
Luzon Development Bank 155,945,146.41 444,071,923.87 3.51% 7.02% 10.54% 14.05% 17.56%
Cordillera Savings Bank 42,743,683.43 123,858,192.76 3.45% 6.90% 10.35% 13.80% 17.26%
Philippine Business Bank 1,184,818,220.39 3,522,480,360.07 3.36% 6.73% 10.09% 13.45% 16.82%
Allied Savings Bank 330,137,674.53 1,010,574,472.46 3.27% 6.53% 9.80% 13.07% 16.33%
Penbank, Inc. 82,271,097.52 254,791,038.35 3.23% 6.46% 9.69% 12.92% 16.14%
Life Savings Bank 21,253,550.43 66,138,275.39 3.21% 6.43% 9.64% 12.85% 16.07%
First Consolidated Bank 551,159,327.81 1,856,880,353.48 2.97% 5.94% 8.90% 11.87% 14.84%
Quezon Coconut Producers SLB Inc. 16,503,982.86 57,268,623.22 2.88% 5.76% 8.65% 11.53% 14.41%
Malasiqui Progressive SLB, Inc. 15,323,442.43 55,048,215.23 2.78% 5.57% 8.35% 11.13% 13.92%
Hiyas Savings & Loan Bank 43,374,512.08 164,731,409.03 2.63% 5.27% 7.90% 10.53% 13.17%
Maritime SLA 16,951,334.79 68,833,229.22 2.46% 4.93% 7.39% 9.85% 12.31%
Lemery Savings & Loan Bank, Inc. 17,246,766.33 70,929,116.35 2.43% 4.86% 7.29% 9.73% 12.16%
World Partners Bank (A Thrift Bank) 35,791,094.52 170,966,160.68 2.09% 4.19% 6.28% 8.37% 10.47%
Liberty Savings Bank 12,005,630.66 63,701,027.16 1.88% 3.77% 5.65% 7.54% 9.42%
BPI Direct Savings Bank 127,595,278.58 842,173,596.94 1.52% 3.03% 4.55% 6.06% 7.58%
CityState Savings Bank 122,386,192.55 814,736,342.62 1.50% 3.00% 4.51% 6.01% 7.51%
Pridestar Development Bank 10,248,881.34 71,093,548.88 1.44% 2.88% 4.32% 5.77% 7.21%
Sampaguita SLA 10,125,884.01 73,481,194.82 1.38% 2.76% 4.13% 5.51% 6.89%
Northpoint Development Bank 6,750,426.34 56,103,745.64 1.20% 2.41% 3.61% 4.81% 6.02%
BPI Globe Banko Inc. Savings Bank 61,982,702.37 524,444,707.32 1.18% 2.36% 3.55% 4.73% 5.91%
Dungganon Bank 7,574,686.33 64,443,329.59 1.18% 2.35% 3.53% 4.70% 5.88%
The Queen City Development Bank 68,472,858.57 691,016,996.13 0.99% 1.98% 2.97% 3.96% 4.95%
Pacific Ace Savings Bank 6,470,420.36 76,675,258.62 0.84% 1.69% 2.53% 3.38% 4.22%
Card SME Bank Inc. (A Thrift Bank) 10,948,415.35 150,765,995.91 0.73% 1.45% 2.18% 2.90% 3.63%
Sun Savings Bank 5,413,145.65 76,867,112.54 0.70% 1.41% 2.11% 2.82% 3.52%
Isla Bank (A Thrift Bank) Inc. 36,324,529.31 631,893,880.25 0.57% 1.15% 1.72% 2.30% 2.87%
Optimum Development Bank 35,340,843.52 687,108,808.57 0.51% 1.03% 1.54% 2.06% 2.57%
Progress SLA 3,715,534.17 84,802,928.79 0.44% 0.88% 1.31% 1.75% 2.19%
HSBC Savings Bank (Phils) Inc. 101,615,255.20 2,888,194,472.00 0.35% 0.70% 1.06% 1.41% 1.76%
Microfinance Maximum SB (Maxbank) 1,916,477.62 62,286,572.17 0.31% 0.62% 0.92% 1.23% 1.54%
Century Savings Bank 25,707,964.37 875,210,065.34 0.29% 0.59% 0.88% 1.17% 1.47%
Bank One Savings and Trust Corp. 14,606,272.53 523,963,118.72 0.28% 0.56% 0.84% 1.12% 1.39%
Bataan SLA 2,142,391.54 78,699,471.64 0.27% 0.54% 0.82% 1.09% 1.36%
Merchants Savings & Loan Association Inc. 795,000.00 669,331,235.75 0.01% 0.02% 0.04% 0.05% 0.06%
BDO Elite Savings Bank 0.00 1,507,557,562.16 0.00% 0.00% 0.00% 0.00% 0.00%
City Savings Bank NA NA NA NA NA NA NA
Grand Total 57,693,562,178.90 85,987,882,856.10 6.71% 13.42% 20.13% 26.84% 33.55%

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