Among Listed Philippine Banks, PBCom Takes the Gold in Insolvency - June 30, 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  

Editor's Note: This is an update of an earlier post: "Among Listed Philippine Banks, PNB Takes the Gold in Insolvency" dated June 20, 2012.

Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets increased by PhP 8.050 billion or 2.04% from March 31, 2012 to June 30, 2012.  This was partially offset by an increase of PhP 0.630 billion  or 0.11% 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 increased by 1.93% from 68.031% as of March 31, 2012 to 69.63% as of June 30, 2012.

Please note that the ratio of Distressed Assets to Total Capital Cushion of three banks on this list is above the borderline level of 100.00%.  These banks have been classified as distressed and are highlighted in yellow.  These banks are as follows:

1. Philippine Bank of Communications (PBCom), has a borderline insolvency ratio of 167.10% as of June 30, 2012, down 5.86% from 177.50% as of March 31, 2012.  Its Total Distressed Assets declined by PhP 0.623 million and its Total Capital Cushion declined by PhP 35.722 million in the second quarter of 2012.
2. Philippine National Bank (PNB) has a borderline insolvency ratio of 153.50% as of June 30, 2012, down 6.03% from 163.35% as of March 31, 2012.
3. China Bank Savings, Inc. has a borderline insolvency ratio of 141.86% as of June 30, 2012, down a slight 0.46% from 142.52%.

It should be noted that PNB's 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 was approved by the stockholders of both banks in the second quarter of 2012, has now been approved by banking regulators in the third quarter of 2012.  (See: "PDIC approves merger of Allied, PNB").

The bank that exhibited a significant decrease in their insolvency ratios was: East West Banking Corporation, which dropped from 56.41% as of March 31, 2011 to 46.65% as of June 30, 2012.

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
March 31, 2012 to June 30, 2012
	March 31, 2012	June 30, 2012	Variance	% Variance
Banco de Oro Unibank	58.25%	65.94%	7.70%	13.21%
China Banking Corporation	53.10%	59.65%	6.55%	12.33%
CityState Savings Bank	34.20%	37.45%	3.25%	9.49%
Rizal Commercial Banking Corporation	69.50%	73.34%	3.84%	5.52%
Bank of the Philippine Islands	51.34%	53.53%	2.20%	4.28%
Security Bank Corporation	37.80%	39.09%	1.28%	3.39%
Philippine Savings Bank	81.15%	82.27%	1.12%	1.38%
Union Bank of the Philippines	84.91%	84.58%	-0.33%	-0.38%
China Bank Savings, Inc.	142.52%	141.86%	-0.66%	-0.46%
Allied Banking Corporation	66.02%	65.12%	-0.90%	-1.36%
Philippine Trust Company	51.82%	50.51%	-1.30%	-2.52%
Philippine Bank of Communications	177.50%	167.10%	-10.40%	-5.86%
Philippine National Bank	163.35%	153.50%	-9.85%	-6.03%
Metropolitan Bank & Trust Company	66.05%	61.57%	-4.48%	-6.78%
East West Banking Corporation	56.41%	46.65%	-9.76%	-17.30%
Grand Total	68.31%	69.63%	1.32%	1.93%

Source: www.bsp.gov.ph

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
March 31, 2012 to June 30, 2012
	March 31, 2012				June 30, 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
Bank	(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)
Philippine Bank of Communications	9,605,657,632.92	5,411,642,825.75	177.50%		8,982,915,157.84	5,375,920,381.27	167.10%		-622,742,475.08	-35,722,444.48	-10.40%		-6.48%	-0.66%	-5.86%
Philippine National Bank	60,946,464,001.47	37,309,439,614.75	163.35%		59,734,643,323.51	38,914,958,287.49	153.50%		-1,211,820,677.96	1,605,518,672.74	-9.85%		-1.99%	4.30%	-6.03%
China Bank Savings, Inc.	1,672,743,819.51	1,173,665,055.26	142.52%		1,446,154,272.29	1,019,400,071.90	141.86%		-226,589,547.22	-154,264,983.36	-0.66%		-13.55%	-13.14%	-0.46%
Union Bank of the Philippines	38,760,712,790.01	45,650,885,590.93	84.91%		37,057,875,238.56	43,813,870,129.41	84.58%		-1,702,837,551.45	-1,837,015,461.52	-0.33%		-4.39%	-4.02%	-0.38%
Philippine Savings Bank	13,601,325,210.06	16,759,739,786.84	81.15%		13,800,587,750.03	16,774,387,958.38	82.27%		199,262,539.97	14,648,171.54	1.12%		1.47%	0.09%	1.38%
Rizal Commercial Banking Corporation	26,600,710,113.13	38,273,962,830.12	69.50%		27,253,199,123.56	37,161,140,871.17	73.34%		652,489,010.43	-1,112,821,958.95	3.84%		2.45%	-2.91%	5.52%
Banco de Oro Unibank	69,886,800,878.72	119,983,815,083.47	58.25%		79,795,225,219.71	121,005,042,628.13	65.94%		14,640,809,513.10	1,021,227,544.66	11.64%		22.47%	0.85%	21.44%
Allied Banking Corporation	13,399,669,031.53	20,296,906,255.80	66.02%		13,293,564,136.14	20,414,316,567.43	65.12%		-106,104,895.39	117,410,311.63	-0.90%		-0.79%	0.58%	-1.36%
Metropolitan Bank & Trust Company	65,533,760,882.97	99,222,043,905.63	66.05%		61,292,038,764.54	99,545,913,839.90	61.57%		-4,241,722,118.43	323,869,934.27	-4.48%		-6.47%	0.33%	-6.78%
China Banking Corporation	22,076,228,426.80	41,575,673,227.32	53.10%		23,029,458,379.20	38,608,797,970.99	59.65%		1,660,140,134.54	-2,966,875,256.33	8.25%		7.77%	-7.14%	16.05%
Bank of the Philippine Islands	47,321,213,011.00	92,180,981,372.00	51.34%		46,504,024,846.00	86,872,774,624.00	53.53%		-817,188,165.00	-5,308,206,748.00	2.20%		-1.73%	-5.76%	4.28%
Philippine Trust Company	8,561,718,369.96	16,523,217,254.71	51.82%		8,459,763,719.54	16,748,089,910.80	50.51%		-101,954,650.42	224,872,656.09	-1.30%		-1.19%	1.36%	-2.52%
East West Banking Corporation	8,685,415,309.09	15,395,752,915.64	56.41%		8,359,973,804.77	17,919,833,842.14	46.65%		-325,441,504.32	2,524,080,926.50	-9.76%		-3.75%	16.39%	-17.30%
Security Bank Corporation	12,390,822,425.97	32,777,702,285.12	37.80%		12,621,692,039.25	32,292,308,063.21	39.09%		230,869,613.28	6,221,869,150.13	-8.44%		1.86%	23.87%	-17.76%
CityState Savings Bank	278,638,718.52	814,736,342.62	34.20%		302,018,405.44	806,533,911.73	37.45%		23,379,686.92	-8,202,430.89	3.25%		8.39%	-1.01%	9.49%
Grand Total	399,321,880,621.66	583,350,164,345.96	68.45%		401,933,134,180.38	577,273,289,057.95	69.63%		2,611,253,558.72	-6,076,875,288.01	1.17%		0.65%	-1.04%	1.71%

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 March 31, 2012 and June 30, 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.