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 72.102 billion or 9.54% of the PhP 755.676 billion in Stockholders Equity (SE) as of June 30, 2012. So, writing off 50% of the Philippine Commercial Banking NPLs would reduce their aggregate stockholders equity by a little less than 5%.
For Philippine Thrift Banks, the NPL levels are much higher on a relative basis. As of June 30, 2012, Philippine Thrift Bank NPLs amounted to PhP 19.830 billion or 26.68% of the PhP 74.331 billion of Stockholders Equity of the Philippine Thrift Banking System for the same period. This is almost 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 13%. Naturally, some banks would be more affected than others. (Weak banks are highlighted in yellow).
Two banks, Silangan Savings and Loan Bank, Inc. and Citibank Savings Inc. would experience a near wipe-out of their respective stockholders equity. 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. Two other banks, namely, Planters Development Bank (32.56% decline in SE) and Security Bank Savings Corporation (32.42% decline in SE), would be severely affected.
| Philippine Thrift Banking System | |||
| NPL as % of SE | |||
| June 30, 2012 | |||
| NPL | SE | NPL/SE | |
| Bank | (In Php) | (In Php) | (In %) |
| Silangan Savings and Loan Bank, Inc. | 16,670,323.99 | 9,740,651.89 | 171.14% |
| Citibank Savings Inc. | 2,856,110,549.96 | 1,818,756,670.18 | 157.04% |
| Planters Development Bank | 2,560,629,104.28 | 3,931,756,700.13 | 65.13% |
| Security Bank Savings Corporation | 515,520,772.12 | 795,088,386.40 | 64.84% |
| Bataan Development Bank | 40,674,274.39 | 70,387,217.02 | 57.79% |
| Legazpi Savings Bank, Inc. | 101,545,758.77 | 178,699,023.83 | 56.83% |
| Comsavings Bank | 197,917,363.94 | 350,468,111.01 | 56.47% |
| Philippine Postal Savings Bank, Inc. | 380,024,247.12 | 688,770,339.88 | 55.17% |
| Opportunity Kauswagan Bank, Inc. | 47,684,373.36 | 87,108,376.48 | 54.74% |
| Metro-Cebu Public Savings Bank | 30,863,778.38 | 60,255,751.33 | 51.22% |
| Farmers Savings and Loan Bank, Inc. | 50,258,569.72 | 100,549,296.43 | 49.98% |
| Sterling Bank of Asia, Inc. | 790,624,665.59 | 1,633,872,061.27 | 48.39% |
| Village Bank, Inc. | 28,818,153.47 | 70,653,647.74 | 40.79% |
| Pampanga Development Bank | 38,978,520.76 | 105,904,741.40 | 36.81% |
| Philippine Savings Bank | 4,356,363,732.95 | 13,303,936,411.40 | 32.74% |
| Malayan Bank Savings and Mortgage Bank, Inc. | 313,632,569.20 | 975,332,768.21 | 32.16% |
| Luzon Development Bank | 120,635,339.90 | 382,298,596.47 | 31.56% |
| Malasiqui Progressive Savings and Loan Bank, Inc. | 14,466,468.15 | 49,198,079.06 | 29.40% |
| Iloilo City Development Bank | 16,904,440.87 | 62,433,690.20 | 27.08% |
| Penbank, Inc. (A Private Development Bank) | 66,828,825.29 | 260,723,835.90 | 25.63% |
| Hiyas Banking Corporation | 40,185,600.53 | 157,846,553.87 | 25.46% |
| University Savings Bank, Inc. | 51,628,327.48 | 205,163,329.73 | 25.16% |
| Allied Savings Bank | 243,874,386.39 | 976,492,885.94 | 24.97% |
| Lemery Savings and Loan Bank, Inc. | 16,874,914.00 | 69,169,391.20 | 24.40% |
| First Consolidated Bank, Inc. | 372,255,186.21 | 1,671,795,340.03 | 22.27% |
| Tong Yang Savings Bank, Inc. | 90,160,279.49 | 407,756,152.68 | 22.11% |
| Cordillera Savings Bank, Inc. | 21,144,063.87 | 97,381,465.00 | 21.71% |
| Producers Savings Bank Corporation | 150,497,298.52 | 701,811,191.57 | 21.44% |
| BPI Family Savings Bank, Inc. | 3,101,887,737.55 | 14,481,315,010.85 | 21.42% |
| Equicom Savings Bank, Inc. | 91,828,345.71 | 461,617,258.29 | 19.89% |
| BPI Direct Savings Bank, Inc. | 158,748,252.54 | 801,926,465.90 | 19.80% |
| Philippine Business Bank, Inc. | 764,916,007.37 | 3,922,725,430.38 | 19.50% |
| World Partners Bank | 30,418,730.86 | 157,957,368.73 | 19.26% |
| Maritime Savings Bank Corporation | 12,532,225.20 | 65,402,781.73 | 19.16% |
| RCBC Savings Bank, Inc. | 1,240,532,347.87 | 6,792,900,833.67 | 18.26% |
| Business and Consumers Bank | 12,969,732.74 | 78,446,370.26 | 16.53% |
| Sampaguita Savings Bank, Inc. | 10,572,407.09 | 64,708,123.36 | 16.34% |
| Wealth Development Bank Corporation | 57,490,084.44 | 353,186,841.84 | 16.28% |
| Quezon Coconut Producers Savings and Loan Bank | 9,350,997.62 | 57,580,765.13 | 16.24% |
| BPI Globe BanKO, Inc., A Savings Bank | 54,467,929.26 | 360,144,746.12 | 15.12% |
| Pacific Ace Savings Bank, Inc. | 10,252,586.49 | 72,319,136.67 | 14.18% |
| Pride Star Development Bank, Inc. | 8,692,326.39 | 67,743,003.08 | 12.83% |
| Northpoint Development Bank, Inc. | 5,705,839.36 | 50,002,124.18 | 11.41% |
| City Savings Bank, Inc. | 203,764,171.46 | 1,977,741,378.55 | 10.30% |
| Dungganon Bank (A Microfinance Thrift Bank), Inc. | 6,045,070.42 | 62,917,082.13 | 9.61% |
| UCPB Savings Bank | 187,376,711.23 | 2,125,681,500.16 | 8.81% |
| Dumaguete City Development Bank, Inc. | 16,734,272.56 | 203,578,072.13 | 8.22% |
| Sun Savings Bank, Inc. | 5,357,675.89 | 72,664,822.80 | 7.37% |
| China Bank Savings Inc. | 82,041,848.35 | 1,134,231,220.75 | 7.23% |
| Card SME Bank, Inc., A Thrift Bank | 11,987,442.75 | 179,116,409.99 | 6.69% |
| Life Savings Bank, Inc. | 3,465,831.47 | 63,317,167.29 | 5.47% |
| Optimum Development Bank, Inc. | 32,270,327.60 | 660,520,247.44 | 4.89% |
| CityState Savings Bank, Inc. | 34,636,907.54 | 773,945,359.88 | 4.48% |
| Bataan Savings and Loan Bank | 3,084,817.02 | 77,808,302.16 | 3.96% |
| Bank One Savings and Trust Corporation | 19,402,717.57 | 520,315,658.47 | 3.73% |
| Tower Development Bank | 3,682,116.29 | 113,529,745.58 | 3.24% |
| HSBC Savings Bank (Phils), Inc. | 89,622,250.40 | 2,938,428,344.64 | 3.05% |
| Queen City Development Bank, Inc. | 14,159,937.67 | 669,119,640.27 | 2.12% |
| Microfinance Maximum Savings Bank, Inc. | 1,056,155.26 | 62,353,596.96 | 1.69% |
| Progress Savings and Loan Bank, Inc. | 1,338,363.83 | 84,103,829.68 | 1.59% |
| Century Savings Bank Corporation | 10,752,766.23 | 883,428,855.96 | 1.22% |
| Merchants Savings and Loan Association, Inc. | 1,110,039.79 | 658,930,240.51 | 0.17% |
| BDO Elite Savings Bank, Inc. | 0.00 | 1,527,059,062.56 | 0.00% |
| Isla Bank (A Thrift Bank), Inc. | 0.00 | 630,420,695.84 | 0.00% |
| Philippine Resources Savings Banking Corporation | 0.00 | 1,195,719,804.03 | 0.00% |
| United Overseas Bank Philippines | 0.00 | 704,856,569.14 | 0.00% |
| Real Bank (A Thrift Bank) Inc. | NA | ||
| Grand Total | 19,830,026,862.52 | 74,331,114,533.36 | 26.68% |
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."
In Circular #0247 dated May 19, 2000, BSP defines Classified Loans as loans which possess the following characteristics:
- Loans especially mentioned because they have potential weaknesses that deserve Management's close attention;
- Substandard Loans are loans which appear to involve a substantial and unreasonable degree of risk to the institution because of unfavorable record or unsatisfactory characteristics;
- Doubtful Loans are Substandard Loans with the added characteristics that existing facts, conditions, and values make collection or liquidation in full highly improbable and in which substantial loss is probable;
- Loss are loans that are considered uncollectible or worthless and are of such little value that their continuance as bankable assets is not warranted although the loans may have some recovery or salvage value.
- Loans Especially Mentioned: 5%
- Substandard - Secured: 6% - 25%
- Substandard - Unsecured: 25%
- Doubtful: 50%
- Loss: 100%
Editor's Note: It is important to note that the Classified Loans figure of PhP 46.626 billion is understated because Real Bank, which reported at least PhP 8.644 billion in Classified Loans as of March 31, 2012, did not have its June 30, 2012 Published Statement of Condition on the BSP website. (See "Philippine Thrift Banks Continue to Improve in the 2nd Quarter of 2012")
| Philippine Thrift Banking System | |||
| Classified Loans vs. NPLs | |||
| June 30, 2012 | |||
| Classified Loans | NPLs | Classified Loans/NPLs | |
| Bank | (In Php) | (In Php) | (In %) |
| Village SLA, Inc. | 430,688,561.64 | 28,818,153.47 | 1494.50% |
| Iloilo City Development Bank | 246,685,343.85 | 16,904,440.87 | 1459.29% |
| China Bank Savings | 1,046,820,690.55 | 82,041,848.35 | 1275.96% |
| Dumaguete City Development Bank | 169,540,000.00 | 16,734,272.56 | 1013.13% |
| Tower Development Bank | 33,141,518.91 | 3,682,116.29 | 900.07% |
| Business & Consumers Bank | 106,533,387.96 | 12,969,732.74 | 821.40% |
| RCBC Savings Bank | 9,577,290,000.00 | 1,240,532,347.87 | 772.03% |
| Comsavings Bank | 1,275,879,789.57 | 197,917,363.94 | 644.65% |
| Life Savings Bank | 21,511,504.50 | 3,465,831.47 | 620.67% |
| University Savings Bank | 300,501,057.42 | 51,628,327.48 | 582.05% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 101,545,758.77 | 511.08% |
| The Queen City Development Bank | 67,402,739.41 | 14,159,937.67 | 476.01% |
| UCPB Savings Bank | 859,497,401.96 | 187,376,711.23 | 458.70% |
| Century Savings Bank | 45,816,390.88 | 10,752,766.23 | 426.09% |
| Wealth Bank - A Development Bank | 224,980,647.93 | 57,490,084.44 | 391.34% |
| CityState Savings Bank | 126,744,191.61 | 34,636,907.54 | 365.92% |
| Equicom SB | 292,217,181.48 | 91,828,345.71 | 318.22% |
| Progress SLA | 3,652,412.88 | 1,338,363.83 | 272.90% |
| Tong Yang Savings Bank Inc. | 237,568,595.28 | 90,160,279.49 | 263.50% |
| Farmers Savings & Loan Bank | 127,467,884.73 | 50,258,569.72 | 253.62% |
| Bataan Development Bank | 102,400,000.00 | 40,674,274.39 | 251.76% |
| Malayan Bank Savings & Mortgage Bank | 755,207,998.25 | 313,632,569.20 | 240.79% |
| Philippine Savings Bank | 9,932,637,170.21 | 4,356,363,732.95 | 228.00% |
| Cordillera Savings Bank | 45,194,969.25 | 21,144,063.87 | 213.75% |
| Producers Savings Bank | 306,601,378.31 | 150,497,298.52 | 203.73% |
| BPI Family Savings Bank | 6,257,691,399.83 | 3,101,887,737.55 | 201.74% |
| Pampanga Development Bank | 70,843,289.18 | 38,978,520.76 | 181.75% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 47,684,373.36 | 180.06% |
| Sampaguita SLA | 18,410,519.35 | 10,572,407.09 | 174.14% |
| Maritime SLA | 20,326,700.98 | 12,532,225.20 | 162.20% |
| Philippine Postal Savings Bank | 597,851,914.66 | 380,024,247.12 | 157.32% |
| Philippine Business Bank | 1,184,818,220.39 | 764,916,007.37 | 154.90% |
| Quezon Coconut Producers SLB Inc. | 14,420,867.07 | 9,350,997.62 | 154.22% |
| Metro Cebu Public Savings Bank | 47,502,510.02 | 30,863,778.38 | 153.91% |
| Planters Development Bank | 3,735,012,550.67 | 2,560,629,104.28 | 145.86% |
| Luzon Development Bank | 166,432,282.71 | 120,635,339.90 | 137.96% |
| Dungganon Bank | 8,185,383.13 | 6,045,070.42 | 135.41% |
| Allied Savings Bank | 316,967,934.59 | 243,874,386.39 | 129.97% |
| City Savings Bank | 248,707,510.75 | 203,764,171.46 | 122.06% |
| First Consolidated Bank | 438,622,986.94 | 372,255,186.21 | 117.83% |
| HSBC Savings Bank (Phils) Inc. | 103,844,745.13 | 89,622,250.40 | 115.87% |
| BPI Globe Banko Inc. Savings Bank | 61,467,929.26 | 54,467,929.26 | 112.85% |
| BPI Direct Savings Bank | 168,413,414.49 | 158,748,252.54 | 106.09% |
| Security Bank Savings Corporation | 539,894,992.37 | 515,520,772.12 | 104.73% |
| Silangan Savings and Loan Bank, Inc. | 17,358,785.89 | 16,670,323.99 | 104.13% |
| Lemery Savings & Loan Bank, Inc. | 16,913,696.48 | 16,874,914.00 | 100.23% |
| Bank One Savings and Trust Corp. | 19,402,717.57 | 19,402,717.57 | 100.00% |
| Bataan SLA | 3,084,817.02 | 3,084,817.02 | 100.00% |
| Hiyas Savings & Loan Bank | 40,185,600.53 | 40,185,600.53 | 100.00% |
| Malasiqui Progressive SLB, Inc. | 14,466,468.15 | 14,466,468.15 | 100.00% |
| Merchants Savings & Loan Association Inc. | 1,110,039.79 | 1,110,039.79 | 100.00% |
| Microfinance Maximum SB (Maxbank) | 1,056,155.26 | 1,056,155.26 | 100.00% |
| Northpoint Development Bank | 5,705,839.36 | 5,705,839.36 | 100.00% |
| Optimum Development Bank | 32,270,327.60 | 32,270,327.60 | 100.00% |
| Pacific Ace Savings Bank | 10,252,586.49 | 10,252,586.49 | 100.00% |
| Penbank, Inc. | 66,828,825.29 | 66,828,825.29 | 100.00% |
| Pridestar Development Bank | 8,692,326.39 | 8,692,326.39 | 100.00% |
| Sun Savings Bank | 5,357,675.89 | 5,357,675.89 | 100.00% |
| World Partners Bank (A Thrift Bank) | 30,418,730.86 | 30,418,730.86 | 100.00% |
| Citibank Savings Inc. | 2,807,641,319.81 | 2,856,110,549.96 | 98.30% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 790,624,665.59 | 96.03% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 11,987,442.75 | 0.00% |
| BDO Elite Savings Bank | 0.00 | 0.00 | NA |
| Isla Bank (A Thrift Bank) Inc. | 35,824,646.91 | 0.00 | NA |
| Liberty Savings Bank | NA | NA | NA |
| Philippine Resources Savings Banking Corporation | 942,002,634.98 | 0.00 | NA |
| Premiere Development Bank | NA | NA | NA |
| United Overseas Bank Philippines | 867,893,716.37 | 0.00 | NA |
| Real Bank (A Thrift Bank) Inc. | NA | NA | NA |
| Grand Total | 46,625,929,658.66 | 19,830,026,862.52 | 235.13% |
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 54.56% of the PhP 85.464 billion in Total Capital Cushion of Philippine Thrift Banks as of June 30, 2012.
| Philippine Thrift Banking System | |||
| Classified Loans as % of Total Capital Cushion | |||
| June 30, 2012 | |||
| Classified Loans | Total Capital Cushion | Classified Loans/Total Capital Cushion | |
| Bank | (In Php) | (In Php) | (In %) |
| Village SLA, Inc. | 430,688,561.64 | 85,601,162.41 | 503.13% |
| Iloilo City Development Bank | 246,685,343.85 | 66,055,710.31 | 373.45% |
| Comsavings Bank | 1,275,879,789.57 | 452,199,610.73 | 282.15% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 190,550,893.59 | 272.36% |
| Business & Consumers Bank | 106,533,387.96 | 78,955,187.35 | 134.93% |
| RCBC Savings Bank | 9,577,290,000.00 | 7,131,983,741.37 | 134.29% |
| University Savings Bank | 300,501,057.42 | 228,592,781.95 | 131.46% |
| Bataan Development Bank | 102,400,000.00 | 79,075,920.15 | 129.50% |
| Farmers Savings & Loan Bank | 127,467,884.73 | 118,338,500.90 | 107.71% |
| China Bank Savings | 1,046,820,690.55 | 1,019,400,071.90 | 102.69% |
| Planters Development Bank | 3,735,012,550.67 | 4,493,071,814.41 | 83.13% |
| Dumaguete City Development Bank | 169,540,000.00 | 217,277,299.29 | 78.03% |
| Philippine Resources Savings Banking Corporation | 942,002,634.98 | 1,262,243,674.14 | 74.63% |
| Philippine Postal Savings Bank | 597,851,914.66 | 823,962,840.17 | 72.56% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 124,518,919.38 | 68.95% |
| Malayan Bank Savings & Mortgage Bank | 755,207,998.25 | 1,116,345,777.45 | 67.65% |
| Metro Cebu Public Savings Bank | 47,502,510.02 | 70,416,695.68 | 67.46% |
| Citibank Savings Inc. | 2,807,641,319.81 | 4,626,549,833.36 | 60.69% |
| United Overseas Bank Philippines | 867,893,716.37 | 1,447,803,997.42 | 59.95% |
| Philippine Savings Bank | 9,932,637,170.21 | 16,774,387,958.48 | 59.21% |
| Pampanga Development Bank | 70,843,289.18 | 123,549,419.19 | 57.34% |
| Wealth Bank - A Development Bank | 224,980,647.93 | 403,307,129.12 | 55.78% |
| Equicom SB | 292,217,181.48 | 525,023,077.34 | 55.66% |
| Tong Yang Savings Bank Inc. | 237,568,595.28 | 447,930,833.59 | 53.04% |
| Producers Savings Bank | 306,601,378.31 | 649,471,114.99 | 47.21% |
| Security Bank Savings Corporation | 539,894,992.37 | 1,336,949,287.29 | 40.38% |
| BPI Family Savings Bank | 6,257,691,399.83 | 15,631,116,655.46 | 40.03% |
| Cordillera Savings Bank | 45,194,969.25 | 114,999,722.22 | 39.30% |
| UCPB Savings Bank | 859,497,401.96 | 2,223,751,763.04 | 38.65% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 1,982,948,594.02 | 38.29% |
| Luzon Development Bank | 166,432,282.71 | 467,297,773.57 | 35.62% |
| Silangan Savings and Loan Bank, Inc. | 17,358,785.89 | 51,238,430.92 | 33.88% |
| Life Savings Bank | 21,511,504.50 | 65,556,807.08 | 32.81% |
| Philippine Business Bank | 1,184,818,220.39 | 3,623,685,633.83 | 32.70% |
| Allied Savings Bank | 316,967,934.59 | 1,015,746,565.62 | 31.21% |
| Maritime SLA | 20,326,700.98 | 68,811,839.22 | 29.54% |
| Tower Development Bank | 33,141,518.91 | 118,433,563.41 | 27.98% |
| Malasiqui Progressive SLB, Inc. | 14,466,468.15 | 57,540,947.14 | 25.14% |
| Sampaguita SLA | 18,410,519.35 | 73,473,403.35 | 25.06% |
| Quezon Coconut Producers SLB Inc. | 14,420,867.07 | 58,522,203.39 | 24.64% |
| Lemery Savings & Loan Bank, Inc. | 16,913,696.48 | 71,454,318.24 | 23.67% |
| Hiyas Savings & Loan Bank | 40,185,600.53 | 171,902,352.90 | 23.38% |
| Penbank, Inc. | 66,828,825.29 | 286,750,207.57 | 23.31% |
| First Consolidated Bank | 438,622,986.94 | 1,918,465,411.34 | 22.86% |
| BPI Direct Savings Bank | 168,413,414.49 | 860,291,802.94 | 19.58% |
| World Partners Bank (A Thrift Bank) | 30,418,730.86 | 181,088,626.37 | 16.80% |
| CityState Savings Bank | 126,744,191.61 | 806,533,911.73 | 15.71% |
| Pacific Ace Savings Bank | 10,252,586.49 | 76,042,652.60 | 13.48% |
| Dungganon Bank | 8,185,383.13 | 64,889,259.48 | 12.61% |
| City Savings Bank | 248,707,510.75 | 1,984,462,889.20 | 12.53% |
| Pridestar Development Bank | 8,692,326.39 | 71,792,073.12 | 12.11% |
| BPI Globe Banko Inc. Savings Bank | 61,467,929.26 | 524,801,276.58 | 11.71% |
| Northpoint Development Bank | 5,705,839.36 | 56,343,745.64 | 10.13% |
| The Queen City Development Bank | 67,402,739.41 | 684,680,835.05 | 9.84% |
| Sun Savings Bank | 5,357,675.89 | 76,888,654.99 | 6.97% |
| Isla Bank (A Thrift Bank) Inc. | 35,824,646.91 | 631,893,880.25 | 5.67% |
| Century Savings Bank | 45,816,390.88 | 873,029,865.98 | 5.25% |
| Optimum Development Bank | 32,270,327.60 | 686,049,339.39 | 4.70% |
| Progress SLA | 3,652,412.88 | 84,796,580.47 | 4.31% |
| Bataan SLA | 3,084,817.02 | 78,391,671.64 | 3.94% |
| Bank One Savings and Trust Corp. | 19,402,717.57 | 522,793,794.10 | 3.71% |
| HSBC Savings Bank (Phils) Inc. | 103,844,745.13 | 2,874,799,696.12 | 3.61% |
| Microfinance Maximum SB (Maxbank) | 1,056,155.26 | 62,219,777.23 | 1.70% |
| Merchants Savings & Loan Association Inc. | 1,110,039.79 | 669,746,853.07 | 0.17% |
| BDO Elite Savings Bank | 0.00 | 1,507,557,562.16 | 0.00% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 189,500,499.98 | 0.00% |
| Liberty Savings Bank | NA | NA | NA |
| Premiere Development Bank | NA | NA | NA |
| Real Bank (A Thrift Bank) Inc. | NA | NA | NA |
| Grand Total | 46,625,929,658.66 | 85,463,854,692.37 | 54.56% |
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 54.56% 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 5.46% and a 50% write-off of classified loans will reduce the thrift banking system's Total Capital Cushion by 27.28%.
Individual Banks
A 10% write-off of Classified Loans would severely impact (by 30% or more) the Total Capital Cushion of two banks (severely affected banks highlighted in yellow, banks that will experience an equity wipe-out hightlighted in red):
- Village SLA, Inc. (50.31% reduction in Total Capital Cushion)
- Iloilo City Development Bank (37.35% reduction in Total Capital Cushion)
A 20% write-off of Classified Loans will totally wipe out the Total Capital Cushion of one bank and severely impact the Total Capital Cushion of three other banks:
- Village SLA, Inc. (100.63% reduction in Total Capital Cushion)
- Iloilo City Development Bank (74.69% reduction in Total Capital Cushion)
- Comsavings Bank (56.43% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (54.47% reduction in Total Capital Cushion)
- Village SLA, Inc. (150.94% reduction in Total Capital Cushion)
- Iloilo City Development Bank (112.04% reduction in Total Capital Cushion)
- Comsavings Bank (84.64% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (81.71% reduction in Total Capital Cushion)
- Business & Consumers Bank (40.48% reduction in Total Capital Cushion)
- RCBC Savings Bank (40.29% reduction in Total Capital Cushion)
- University Savings Bank (39.44% reduction in Total Capital Cushion)
- Bataan Development Bank (38.5% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (32.31% reduction in Total Capital Cushion)
- China Bank Savings (30.81% reduction in Total Capital Cushion)
A 40% write-off of Classified Loans will totally wipe out the Total Capital Cushion of four banks and severely affect (reduce by 30% or more) the Total Capital Cushion of eight more banks:
- Village SLA, Inc. (201.25% reduction in Total Capital Cushion)
- Iloilo City Development Bank (149.38% reduction in Total Capital Cushion)
- Comsavings Bank (112.86% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (108.94% reduction in Total Capital Cushion)
- Business & Consumers Bank (53.97% reduction in Total Capital Cushion)
- RCBC Savings Bank (53.71% reduction in Total Capital Cushion)
- University Savings Bank (52.58% reduction in Total Capital Cushion)
- Bataan Development Bank (51.80% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (43.09% reduction in Total Capital Cushion)
- China Bank Savings (41.08% reduction in Total Capital Cushion)
- Planters Development Bank (33.25% reduction in Total Capital Cushion)
- Dumaguete City Development Bank (31.21% reduction in Total Capital Cushion)
A 50% write-off of Classified Loans will totally wipe out the Total Capital Cushion of four banks and severely affect (reduce by 30% or more) the Total Capital Cushion of fourteen more banks:
- Village SLA, Inc. (251.57% reduction in Total Capital Cushion)
- Iloilo City Development Bank (186.73% reduction in Total Capital Cushion)
- Comsavings Bank (141.07% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (136.18% reduction in Total Capital Cushion)
- Business & Consumers Bank (67.46% reduction in Total Capital Cushion)
- RCBC Savings Bank (67.14% reduction in Total Capital Cushion)
- University Savings Bank (65.73% reduction in Total Capital Cushion)
- Bataan Development Bank (64.75% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (53.86% reduction in Total Capital Cushion)
- China Bank Savings (51.34% reduction in Total Capital Cushion)
- Planters Development Bank (41.56% reduction in Total Capital Cushion)
- Dumaguete City Development Bank (39.01% reduction in Total Capital Cushion)
- Philippine Resources Savings Banking Corporation (37.31% reduction in Total Capital Cushion)
- Philippine Postal Savings Bank (36.28% reduction in Total Capital Cushion)
- Opportunity Kauswagan Bank, Inc. (34.48% reduction in Total Capital Cushion)
- Malayan Bank Savings & Mortgage Bank (33.83% reduction in Total Capital Cushion)
- Metro Cebu Public Savings Bank (33.73% reduction in Total Capital Cushion)
- Citibank Savings Inc. (30.34% 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 2nd 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? - June 30, 2012". 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 %) |
| Village SLA, Inc. | 430,688,561.64 | 85,601,162.41 | 50.31% | 100.63% | 150.94% | 201.25% | 251.57% |
| Iloilo City Development Bank | 246,685,343.85 | 66,055,710.31 | 37.35% | 74.69% | 112.04% | 149.38% | 186.73% |
| Comsavings Bank | 1,275,879,789.57 | 452,199,610.73 | 28.21% | 56.43% | 84.64% | 112.86% | 141.07% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 190,550,893.59 | 27.24% | 54.47% | 81.71% | 108.94% | 136.18% |
| Business & Consumers Bank | 106,533,387.96 | 78,955,187.35 | 13.49% | 26.99% | 40.48% | 53.97% | 67.46% |
| RCBC Savings Bank | 9,577,290,000.00 | 7,131,983,741.37 | 13.43% | 26.86% | 40.29% | 53.71% | 67.14% |
| University Savings Bank | 300,501,057.42 | 228,592,781.95 | 13.15% | 26.29% | 39.44% | 52.58% | 65.73% |
| Bataan Development Bank | 102,400,000.00 | 79,075,920.15 | 12.95% | 25.90% | 38.85% | 51.80% | 64.75% |
| Farmers Savings & Loan Bank | 127,467,884.73 | 118,338,500.90 | 10.77% | 21.54% | 32.31% | 43.09% | 53.86% |
| China Bank Savings | 1,046,820,690.55 | 1,019,400,071.90 | 10.27% | 20.54% | 30.81% | 41.08% | 51.34% |
| Planters Development Bank | 3,735,012,550.67 | 4,493,071,814.41 | 8.31% | 16.63% | 24.94% | 33.25% | 41.56% |
| Dumaguete City Development Bank | 169,540,000.00 | 217,277,299.29 | 7.80% | 15.61% | 23.41% | 31.21% | 39.01% |
| Philippine Resources Savings Banking Corporation | 942,002,634.98 | 1,262,243,674.14 | 7.46% | 14.93% | 22.39% | 29.85% | 37.31% |
| Philippine Postal Savings Bank | 597,851,914.66 | 823,962,840.17 | 7.26% | 14.51% | 21.77% | 29.02% | 36.28% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 124,518,919.38 | 6.90% | 13.79% | 20.69% | 27.58% | 34.48% |
| Malayan Bank Savings & Mortgage Bank | 755,207,998.25 | 1,116,345,777.45 | 6.77% | 13.53% | 20.30% | 27.06% | 33.83% |
| Metro Cebu Public Savings Bank | 47,502,510.02 | 70,416,695.68 | 6.75% | 13.49% | 20.24% | 26.98% | 33.73% |
| Citibank Savings Inc. | 2,807,641,319.81 | 4,626,549,833.36 | 6.07% | 12.14% | 18.21% | 24.27% | 30.34% |
| United Overseas Bank Philippines | 867,893,716.37 | 1,447,803,997.42 | 5.99% | 11.99% | 17.98% | 23.98% | 29.97% |
| Philippine Savings Bank | 9,932,637,170.21 | 16,774,387,958.48 | 5.92% | 11.84% | 17.76% | 23.69% | 29.61% |
| Pampanga Development Bank | 70,843,289.18 | 123,549,419.19 | 5.73% | 11.47% | 17.20% | 22.94% | 28.67% |
| Wealth Bank - A Development Bank | 224,980,647.93 | 403,307,129.12 | 5.58% | 11.16% | 16.74% | 22.31% | 27.89% |
| Equicom SB | 292,217,181.48 | 525,023,077.34 | 5.57% | 11.13% | 16.70% | 22.26% | 27.83% |
| Tong Yang Savings Bank Inc. | 237,568,595.28 | 447,930,833.59 | 5.30% | 10.61% | 15.91% | 21.21% | 26.52% |
| Producers Savings Bank | 306,601,378.31 | 649,471,114.99 | 4.72% | 9.44% | 14.16% | 18.88% | 23.60% |
| Security Bank Savings Corporation | 539,894,992.37 | 1,336,949,287.29 | 4.04% | 8.08% | 12.11% | 16.15% | 20.19% |
| BPI Family Savings Bank | 6,257,691,399.83 | 15,631,116,655.46 | 4.00% | 8.01% | 12.01% | 16.01% | 20.02% |
| Cordillera Savings Bank | 45,194,969.25 | 114,999,722.22 | 3.93% | 7.86% | 11.79% | 15.72% | 19.65% |
| UCPB Savings Bank | 859,497,401.96 | 2,223,751,763.04 | 3.87% | 7.73% | 11.60% | 15.46% | 19.33% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 1,982,948,594.02 | 3.83% | 7.66% | 11.49% | 15.32% | 19.14% |
| Luzon Development Bank | 166,432,282.71 | 467,297,773.57 | 3.56% | 7.12% | 10.68% | 14.25% | 17.81% |
| Silangan Savings and Loan Bank, Inc. | 17,358,785.89 | 51,238,430.92 | 3.39% | 6.78% | 10.16% | 13.55% | 16.94% |
| Life Savings Bank | 21,511,504.50 | 65,556,807.08 | 3.28% | 6.56% | 9.84% | 13.13% | 16.41% |
| Philippine Business Bank | 1,184,818,220.39 | 3,623,685,633.83 | 3.27% | 6.54% | 9.81% | 13.08% | 16.35% |
| Allied Savings Bank | 316,967,934.59 | 1,015,746,565.62 | 3.12% | 6.24% | 9.36% | 12.48% | 15.60% |
| Maritime SLA | 20,326,700.98 | 68,811,839.22 | 2.95% | 5.91% | 8.86% | 11.82% | 14.77% |
| Tower Development Bank | 33,141,518.91 | 118,433,563.41 | 2.80% | 5.60% | 8.39% | 11.19% | 13.99% |
| Malasiqui Progressive SLB, Inc. | 14,466,468.15 | 57,540,947.14 | 2.51% | 5.03% | 7.54% | 10.06% | 12.57% |
| Sampaguita SLA | 18,410,519.35 | 73,473,403.35 | 2.51% | 5.01% | 7.52% | 10.02% | 12.53% |
| Quezon Coconut Producers SLB Inc. | 14,420,867.07 | 58,522,203.39 | 2.46% | 4.93% | 7.39% | 9.86% | 12.32% |
| Lemery Savings & Loan Bank, Inc. | 16,913,696.48 | 71,454,318.24 | 2.37% | 4.73% | 7.10% | 9.47% | 11.84% |
| Hiyas Savings & Loan Bank | 40,185,600.53 | 171,902,352.90 | 2.34% | 4.68% | 7.01% | 9.35% | 11.69% |
| Penbank, Inc. | 66,828,825.29 | 286,750,207.57 | 2.33% | 4.66% | 6.99% | 9.32% | 11.65% |
| First Consolidated Bank | 438,622,986.94 | 1,918,465,411.34 | 2.29% | 4.57% | 6.86% | 9.15% | 11.43% |
| BPI Direct Savings Bank | 168,413,414.49 | 860,291,802.94 | 1.96% | 3.92% | 5.87% | 7.83% | 9.79% |
| World Partners Bank (A Thrift Bank) | 30,418,730.86 | 181,088,626.37 | 1.68% | 3.36% | 5.04% | 6.72% | 8.40% |
| CityState Savings Bank | 126,744,191.61 | 806,533,911.73 | 1.57% | 3.14% | 4.71% | 6.29% | 7.86% |
| Pacific Ace Savings Bank | 10,252,586.49 | 76,042,652.60 | 1.35% | 2.70% | 4.04% | 5.39% | 6.74% |
| Dungganon Bank | 8,185,383.13 | 64,889,259.48 | 1.26% | 2.52% | 3.78% | 5.05% | 6.31% |
| City Savings Bank | 248,707,510.75 | 1,984,462,889.20 | 1.25% | 2.51% | 3.76% | 5.01% | 6.27% |
| Pridestar Development Bank | 8,692,326.39 | 71,792,073.12 | 1.21% | 2.42% | 3.63% | 4.84% | 6.05% |
| BPI Globe Banko Inc. Savings Bank | 61,467,929.26 | 524,801,276.58 | 1.17% | 2.34% | 3.51% | 4.69% | 5.86% |
| Northpoint Development Bank | 5,705,839.36 | 56,343,745.64 | 1.01% | 2.03% | 3.04% | 4.05% | 5.06% |
| The Queen City Development Bank | 67,402,739.41 | 684,680,835.05 | 0.98% | 1.97% | 2.95% | 3.94% | 4.92% |
| Sun Savings Bank | 5,357,675.89 | 76,888,654.99 | 0.70% | 1.39% | 2.09% | 2.79% | 3.48% |
| Isla Bank (A Thrift Bank) Inc. | 35,824,646.91 | 631,893,880.25 | 0.57% | 1.13% | 1.70% | 2.27% | 2.83% |
| Century Savings Bank | 45,816,390.88 | 873,029,865.98 | 0.52% | 1.05% | 1.57% | 2.10% | 2.62% |
| Optimum Development Bank | 32,270,327.60 | 686,049,339.39 | 0.47% | 0.94% | 1.41% | 1.88% | 2.35% |
| Progress SLA | 3,652,412.88 | 84,796,580.47 | 0.43% | 0.86% | 1.29% | 1.72% | 2.15% |
| Bataan SLA | 3,084,817.02 | 78,391,671.64 | 0.39% | 0.79% | 1.18% | 1.57% | 1.97% |
| Bank One Savings and Trust Corp. | 19,402,717.57 | 522,793,794.10 | 0.37% | 0.74% | 1.11% | 1.48% | 1.86% |
| HSBC Savings Bank (Phils) Inc. | 103,844,745.13 | 2,874,799,696.12 | 0.36% | 0.72% | 1.08% | 1.44% | 1.81% |
| Microfinance Maximum SB (Maxbank) | 1,056,155.26 | 62,219,777.23 | 0.17% | 0.34% | 0.51% | 0.68% | 0.85% |
| Merchants Savings & Loan Association Inc. | 1,110,039.79 | 669,746,853.07 | 0.02% | 0.03% | 0.05% | 0.07% | 0.08% |
| BDO Elite Savings Bank | 0.00 | 1,507,557,562.16 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 189,500,499.98 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Liberty Savings Bank | NA | NA | NA | NA | NA | NA | NA |
| Premiere Development Bank | NA | NA | NA | NA | NA | NA | NA |
| Real Bank (A Thrift Bank) Inc. | NA | NA | NA | NA | NA | NA | NA |
| Grand Total | 46,625,929,658.66 | 85,463,854,692.37 | 5.46% | 10.91% | 16.37% | 21.82% | 27.28% |
Source: www.bsp.gov.ph
Very insightful! thanks! :)
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