Among Listed Philippine Banks, PNB Takes the Silver in Insolvency - September 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.  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, PBCom Takes the Gold in Insolvency - June 30, 2012" dated October 15, 2012.

Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets decreased by Php 19.912 billion or 5.07% from June 30, 2012 to September 30, 2012.  This was partially matched by an decrease of Php 6.669 billion  or 1.17% 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 decreased by a significant 7.64% from 69.63% as of June 30, 2012 to 61.07% as of September 30, 2012.

Please note that the ratio of Distressed Assets to Total Capital Cushion of two 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. China Bank Savings, Inc. has a borderline insolvency ratio of 185.52% as of September  30, 2012, up a very significant down 43.66% from 141.86% as of June 30, 2012.  Although China Bank Savings, Inc. is not listed, its parent, China Banking Corporation, is.
2. Philippine National Bank (PNB) has a borderline insolvency ratio of 156.29% as of September 30, 2012, up 2.79% from 153.50% as of June 30, 2012.

It should be noted that the three-way merger discussed between BPI, PNB, and Allied Bank will be a credit positive for PNB, which has the worst credit rating among the three banks concerned in the merger.  (See: "Moody’s says merger to improve PNB rating").

The Published Statement of Condition of Philippine Bank of Communications (PBCom), which was the topped the list of distressed Philippine banks as of June 30, 2012, was not availabe for the period ending September 30, 2012.  See: "Among Listed Philippine Banks, PBCom Takes the Gold in Insolvency - June 30, 2012".


The banks that exhibited a significant decrease in their insolvency ratios were:

1. Security Banking Corporation, which dropped from 39.09% as of June 30, 2012 to 24.36% as of September 30, 2012, a percentage drop of 37.67%.
2. Banco de Oro Unibank, which dropped from 65.94% as of June 30, 2012 to 48.21% as of September 30, 2012, a percentage drop of 26.88%

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
June 30, 2012 to September 30, 2012
	June 30, 2012	September 30, 2012	Variance	% Variance
China Bank Savings, Inc.	141.86%	185.52%	43.66%	30.78%
Philippine Savings Bank	82.27%	88.92%	6.65%	8.08%
East West Banking Corporation	46.65%	48.36%	1.71%	3.67%
Union Bank of the Philippines	84.58%	87.48%	2.90%	3.43%
CityState Savings Bank	37.45%	38.57%	1.12%	3.00%
Philippine National Bank	153.50%	156.29%	2.79%	1.81%
Allied Banking Corporation	65.12%	64.41%	-0.71%	-1.09%
Philippine Trust Company	50.51%	49.11%	-1.41%	-2.78%
Metropolitan Bank & Trust Company	61.57%	58.94%	-2.63%	-4.27%
Bank of the Philippine Islands	53.53%	50.40%	-3.13%	-5.85%
Rizal Commercial Banking Corporation	73.34%	68.77%	-4.57%	-6.23%
China Banking Corporation	59.65%	53.38%	-6.27%	-10.51%
Banco de Oro Unibank	65.94%	48.21%	-17.73%	-26.88%
Security Bank Corporation	39.09%	24.36%	-14.72%	-37.67%
Grand Total	68.71%	61.07%	-7.64%	-11.11%

Source: www.bsp.gov.ph

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
June 30, 2012 to September 30, 2012
	June 30, 2012				September 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 %)
China Bank Savings, Inc.	1,446,154,272.29	1,019,400,071.90	141.86%		1,898,277,021.68	1,023,197,782.14	185.52%		452,122,749.39	-154,264,983.36	43.66%		31.26%	-15.13%	30.78%
Philippine National Bank	59,734,643,323.51	38,914,958,287.49	153.50%		50,799,838,940.95	32,504,359,516.71	156.29%		-8,934,804,382.56	1,605,518,672.74	2.79%		-14.96%	4.13%	1.81%
Philippine Savings Bank	13,800,587,750.03	16,774,387,958.38	82.27%		14,692,734,483.48	16,524,087,878.48	88.92%		892,146,733.45	14,648,171.54	6.65%		6.46%	0.09%	8.08%
Union Bank of the Philippines	37,057,875,238.56	43,813,870,129.41	84.58%		38,394,556,414.93	43,887,492,186.78	87.48%		1,336,681,176.37	-1,837,015,461.52	2.90%		3.61%	-4.19%	3.43%
Rizal Commercial Banking Corporation	27,253,199,123.56	37,161,140,871.17	73.34%		25,702,007,474.49	37,372,568,399.29	68.77%		-1,551,191,649.07	-1,112,821,958.95	-4.57%		-5.69%	-2.99%	-6.23%
Allied Banking Corporation	13,293,564,136.14	20,414,316,567.43	65.12%		13,279,854,327.10	20,618,612,108.27	64.41%		-13,709,809.04	117,410,311.63	-0.71%		-0.10%	0.58%	-1.09%
Metropolitan Bank & Trust Company	61,292,038,764.54	99,545,913,839.90	61.57%		58,589,388,144.26	99,399,052,866.07	58.94%		-2,702,650,620.28	323,869,934.27	-2.63%		-4.41%	0.33%	-4.27%
China Banking Corporation	23,029,458,379.20	38,608,797,970.99	59.65%		21,113,412,180.64	39,555,560,128.40	53.38%		-1,916,046,198.56	-2,966,875,256.33	-6.27%		-8.32%	-7.68%	-10.51%
Bank of the Philippine Islands	46,504,024,846.00	86,872,774,624.00	53.53%		43,970,127,078.00	87,241,945,395.00	50.40%		-2,533,897,768.00	-5,308,206,748.00	-3.13%		-5.45%	-6.11%	-5.85%
Philippine Trust Company	8,459,763,719.54	16,748,089,910.80	50.51%		8,158,501,407.67	16,613,937,357.88	49.11%		-301,262,311.87	224,872,656.09	-1.41%		-3.56%	1.34%	-2.78%
East West Banking Corporation	8,359,973,804.77	17,919,833,842.14	46.65%		8,837,712,599.78	18,274,068,390.58	48.36%		477,738,795.01	2,524,080,926.50	1.71%		5.71%	14.09%	3.67%
Banco de Oro Unibank	79,795,225,219.71	121,005,042,628.13	65.94%		79,441,752,672.48	164,765,851,685.01	48.21%		-353,472,547.23	1,021,227,544.66	-17.73%		-0.44%	0.84%	-26.88%
CityState Savings Bank	302,018,405.44	806,533,911.73	37.45%		311,081,927.08	806,533,911.73	38.57%		9,063,521.64	-8,202,430.89	1.12%		3.00%	-1.02%	3.00%
Security Bank Corporation	12,621,692,039.25	32,292,308,063.21	39.09%		7,848,582,981.88	32,217,229,745.77	24.36%		-4,773,109,057.37	-1,112,821,958.95	-14.72%		-37.82%	-3.45%	-37.67%
Grand Total	392,950,219,022.54	571,897,368,676.68	68.71%		373,037,827,654.42	610,804,497,352.11	61.07%		-19,912,391,368.12	-6,668,580,580.57	-7.64%		-5.07%	-1.17%	-11.11%

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 June 30, 2012 and September 30, 2012 as published in the BSP website (www.bsp.gov.ph) or the Philippine Stock Exchange website (www.pse.com.ph) or the individual bank's own website. 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.