Philippine U/KBs Show Some Deterioration in the 2nd 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.  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 4.6 billion or 0.82% from March 31, 2012 to June 30, 2012.  This increase was compounded by a 1.26% decrease 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 increased by 1.59%, from 75.61% as of March 31, 2012 to 77.21% as of June 30, 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 failed in late April 2012 and 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. Philippine Veterans Bank (35.48% decrease)
2. Standard Chartered Bank (20.98% decrease)
3. East West Banking Corporation (17.30% decrease)

The banks that exhibited significant deterioration in this ratio include:

1. Asia United Bank Corporation (76.49% increase)
2. Maybank Philippines, Inc. (30.76% increase)
3. HongKong & Shanghai Banking Corporation (27.79% increase)
4. Internationale Nederlanden Groep BK (25.57% increase)
5. Chinatrust (Philippines) Commercial Banking Corporation (24.29% 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 2nd Qtr. of  2012.  Two banks ranked as distressed in the 1st Qtr. of 2012 showed some deterioration in their distressed ratios as of June 30, 2012.  These banks are:

1. Bank of Commerce (2.12% increase)
2. United Coconut Planters Bank (0.94% increase)

United Coconut Planters Bank continues to rank as the most distressed Universal and 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.

The list of banks classified as distressed as of June 30, 2012 are as follows:

1. United Coconut Planters Bank (Distressed Ratio of 649.99%)
2. Standard Chartered Bank (Distressed Ratio of 210.69%)
3. Philippine Bank of Communications (Distressed Ratio of 167.10%)
4. Bank of Commerce (Distressed Ratio of 165.11%)
5. Philippine National Bank (Distressed Ratio of 145.57%)
6. Philippine Veterans Bank (Distressed Ratio of 116.61%)

All these banks were flagged as borderline insolvent (highlighted in yellow) 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 205.57% as of June 30, 2012, down from 211.93% as of March 31, 2012.

Philippine Universal and Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
March 31, 2012 to June 30, 2012
In %
Bank	March 31, 2012	June 30, 2012	Variance	% Variance
Asia United Bank Corporation	50.32%	88.80%	38.48%	76.49%
Maybank Philippines Inc.	41.96%	54.86%	12.90%	30.76%
HongKong & Shanghai Banking Corporation	55.44%	70.84%	15.41%	27.79%
Internationale Nederlanden Groep BK	69.30%	87.02%	17.72%	25.57%
Chinatrust (Philippines) Commercial Banking Corporation	16.53%	20.55%	4.02%	24.29%
Banco De Oro Unibank	58.25%	65.94%	7.70%	13.21%
China Banking Corporation	53.10%	59.65%	6.55%	12.33%
Al-Amanah Islamic Bank of the Philippines	16.63%	17.05%	1.59%	10.26%
Rizal Commercial Banking Corporation	69.50%	73.34%	3.84%	5.52%
BDO Private Bank, Inc.	3.32%	3.48%	0.16%	4.70%
Bank of the Philippine Islands	51.34%	53.53%	2.20%	4.28%
Robinsons Bank Corporation	20.50%	21.22%	0.72%	3.51%
Security Bank Corporation	37.80%	39.09%	1.28%	3.39%
Development Bank of the Philippines	47.23%	48.68%	1.45%	3.06%
Bank of Commerce	161.68%	165.11%	3.43%	2.12%
Land Bank of the Philippines	61.63%	62.73%	1.09%	1.77%
United Coconut Planters Bank	643.97%	649.99%	6.02%	0.94%
Union Bank of the Philippines	84.91%	84.58%	-0.33%	-0.38%
Philippine National Bank	147.39%	145.57%	-1.83%	-1.24%
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%
Metropolitan Bank & Trust Company	66.05%	61.57%	-4.48%	-6.78%
East West Banking Corporation	56.41%	46.65%	-9.76%	-17.30%
Standard Chartered Bank	266.65%	210.69%	-55.96%	-20.98%
Philippine Veterans Bank	180.74%	116.61%	-64.13%	-35.48%
Grand Total	75.61%	77.21%	1.60%	2.12%

Source: www.bsp.gov.ph

Philippine Universal and Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
March 31, 2012 to June 30, 2012
In Php
		March 31, 2012				June 30, 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	58,346,163,511.76	9,060,379,410.73	643.97%		58,788,229,194.25	9,044,452,080.29	649.99%		442,065,682.49	-15,927,330.44	6.02%		0.76%	-0.18%	0.94%
Standard Chartered Bank	7,829,630,180.18	2,936,275,345.21	266.65%		5,949,712,292.86	2,823,851,791.39	210.69%		-1,879,917,887.32	-112,423,553.82	-55.96%		-24.01%	-3.83%	-20.98%
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%
Bank of Commerce	32,940,752,605.77	20,373,765,341.59	161.68%		32,829,846,240.56	19,883,188,091.20	165.11%		-110,906,365.21	-490,577,250.39	3.43%		-0.34%	-2.41%	2.12%
Philippine National Bank	60,946,464,001.47	41,349,439,614.75	147.39%		59,734,643,323.51	41,035,624,017.49	145.57%		-1,211,820,677.96	-313,815,597.26	-1.83%		-1.99%	-0.76%	-1.24%
Philippine Veterans Bank	11,386,593,846.84	6,300,066,206.28	180.74%		7,345,774,272.58	6,299,438,025.35	116.61%		-4,040,819,574.26	-628,180.93	-64.13%		-35.49%	-0.01%	-35.48%
Asia United Bank Corporation	5,288,994,151.41	10,511,663,015.14	50.32%		10,330,877,520.13	11,633,890,525.31	88.80%		5,041,883,368.72	1,122,227,510.17	38.48%		95.33%	10.68%	76.49%
Internationale Nederlanden Groep BK	1,834,533,107.88	2,647,280,603.37	69.30%		2,297,368,164.50	2,640,172,199.22	87.02%		462,835,056.62	-7,108,404.15	17.72%		25.23%	-0.27%	25.57%
Union Bank of the Philippines	38,760,712,790.01	45,650,885,590.92	84.91%		37,057,875,238.54	43,813,870,129.41	84.58%		-1,702,837,551.47	-1,837,015,461.51	-0.33%		-4.39%	-4.02%	-0.38%
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%
HongKong & Shanghai Banking Corporation	3,000,103,881.92	5,411,909,952.04	55.44%		3,767,660,649.19	5,318,385,931.73	70.84%		767,556,767.27	-93,524,020.31	15.41%		25.58%	-1.73%	27.79%
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%		9,908,424,340.99	1,021,227,544.66	7.70%		14.18%	0.85%	13.21%
Allied Banking Corporation	13,399,669,031.50	20,296,906,255.80	66.02%		13,293,564,136.14	20,414,316,567.43	65.12%		-106,104,895.36	117,410,311.63	-0.90%		-0.79%	0.58%	-1.36%
Land Bank of the Philippines	33,900,145,235.73	55,001,642,722.05	61.63%		34,323,507,164.53	54,718,065,876.33	62.73%		423,361,928.80	-283,576,845.72	1.09%		1.25%	-0.52%	1.77%
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%		953,229,952.40	-2,966,875,256.33	6.55%		4.32%	-7.14%	12.33%
Maybank Philippines Inc.	3,037,504,931.61	7,239,824,313.81	41.96%		3,213,237,618.59	5,857,123,131.49	54.86%		175,732,686.98	-1,382,701,182.32	12.90%		5.79%	-19.10%	30.76%
Bank of the Philippine Islands	47,321,213,011.63	92,180,981,372.08	51.34%		46,504,024,846.43	86,872,774,623.13	53.53%		-817,188,165.20	-5,308,206,748.95	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%
Development Bank of the Philippines	17,008,446,193.85	36,008,144,271.63	47.23%		17,429,510,384.31	35,802,778,658.05	48.68%		421,064,190.46	-205,365,613.58	1.45%		2.48%	-0.57%	3.06%
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	-485,394,221.91	1.28%		1.86%	-1.48%	3.39%
Robinsons Bank Corporation	1,144,879,604.03	5,584,142,208.47	20.50%		1,185,449,722.06	5,586,015,378.89	21.22%		40,570,118.03	1,873,170.42	0.72%		3.54%	0.03%	3.51%
Chinatrust (Philippines) Commercial Banking Corporation	1,049,304,240.66	6,346,182,232.09	16.53%		1,307,686,619.44	6,363,267,438.22	20.55%		258,382,378.78	17,085,206.13	4.02%		24.62%	0.27%	24.29%
Al-Amanah Islamic Bank of the Philippines	82,026,978.27	493,157,273.79	16.63%		84,112,650.05	493,191,649.00	17.05%		1,691,183.75	-39,675,098.85	1.59%		2.05%	-7.45%	10.26%
BDO Private Bank, Inc.	168,810,398.09	5,084,420,800.74	3.32%		176,561,855.52	5,079,157,036.06	3.48%		7,751,457.43	-5,263,764.68	0.16%		4.59%	-0.10%	4.70%
Grand Total	560,787,061,742.17	741,640,876,858.25	75.61%		565,413,908,101.60	732,336,610,657.60	77.21%		4,626,451,871.40	-9,343,975,674.71	1.59%		0.82%	-1.26%	2.11%

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' published statements of condition as of March 31 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.