Philippine U/KBs Improve in the 3rd 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 decreased by Php 42.775 billion or 6.91% from June 30, 2012 to September 30, 2012.  This decrease was compounded by a 4.37% increase 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 decreased by 10.81%, from 81.71% as of June 30, 2012 to 72.88% as of September 30, 2012.

Those banks that posted significant improvements in this ratio include:

1. Internationale Nederlanden Groep BK (70.92% decrease)
2. Deutsche Bank AG (46.32% decrease)
3. Security Bank (37.67% decrease)
4. Banco de Oro Unibank (26.88% decrease)
5. Citibank N.A. (24.79% decrease)
6. Standard Chartered Bank (15.73 decrease)

The banks that exhibited significant deterioration in this ratio include:

1. JP Morgan Chase National Bank Association (531.40% increase)
2. ANZ Banking Group Ltd (174.96% increase)
3. Mizuho Corporate Bank Ltd. - Manila Branch (163.84% increase)
4. Mega International Commercial Bank Company Limited (34.83% 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 3rd Qtr. of  2012.  Three banks ranked as distressed in the 2nd Qtr. of 2012 showed some deterioration in their distressed ratios as of September 30, 2012.  These banks are:

1. Philippine National Bank (7.36% increase)
2. United Coconut Planters Bank (6.35% increase)
3. Bank of China Limited - Manila Branch (1.98% increase)

United Coconut Planters Bank continues to rank as the most distressed domestic Universal and Commercial bank in the country.  Its Total Distressed Assets are almost than seven 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 September 30, 2012 are as follows:

1. Bank of China Limited - Manila Branch (Distressed Ratio of 815.07%)
2. United Coconut Planters Bank (Distressed Ratio of 691.24%)
3. Citibank N.A. (Distressed Ratio of 252.77)
4. Standard Chartered Bank (Distressed Ratio of 177.56%)
5. Bank of Commerce (Distressed Ratio of 164.70%)
6. Philippine Bank of Communications (Distressed Ratio of 158.86%)
7. Philippine National Bank (Distressed Ratio of 156.29%)
8. Korea Exchange Bank (Distressed Ratio of 110.69%)
9. Philippine Veterans Bank (Distressed Ratio of 102.14%)

Deutsche Bank AG, which had a Total Distressed Asset Ratio of 172.89% as of June 30, 2012, dropped out of the list of distressed banks, with a Total Distressed Asset Ratio of 92.81% as of September 30, 2012.

All these banks were flagged as borderline insolvent (highlighted in yellow) as of June 30, 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 223.31% as of September 30, 2012, down from 225.48% as of June 30, 2012.  For a list of Distressed Banks as of June 30, 2012, please check out a previous blog post: "Philippine U/KBs Show Some Deterioration in the 2nd Qtr. of 2012".

Philippine Universal and Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
June 30, 2012 to September 30, 2012
In %
Bank	June 30, 2012	September 30, 2012	Variance	% Variance
JP Morgan Chase National Bank Association	8.45%	53.33%	44.88%	531.40%
ANZ Banking Group Ltd	7.16%	19.70%	12.54%	174.96%
Mizuho Corporate Bank Ltd. - Manila Branch	13.62%	35.95%	22.32%	163.84%
Mega International Commercial Bank Company Limited	71.69%	96.65%	24.97%	34.83%
Al-Amanah Islamic Bank of the Philippines	17.05%	18.71%	1.66%	9.73%
Philippine National Bank	145.57%	156.29%	10.72%	7.36%
East West Banking Corporation	46.65%	49.84%	3.19%	6.83%
United Coconut Planters Bank	649.99%	691.24%	41.24%	6.35%
Maybank Philippines Inc.	54.86%	57.16%	2.30%	4.19%
Union Bank of the Philippines	84.58%	87.48%	2.90%	3.43%
Bank of China Limited - Manila Branch	799.27%	815.07%	15.80%	1.98%
Robinsons Bank Corporation	21.22%	21.63%	0.41%	1.93%
Asia United Bank Corporation	88.80%	89.77%	0.97%	1.09%
BDO Private Bank, Inc.	3.48%	3.50%	0.02%	0.63%
HongKong & Shanghai Banking Corporation	70.84%	70.97%	0.13%	0.18%
Chinatrust (Philippines) Commercial Banking Corporation	20.55%	20.54%	-0.01%	-0.07%
Bank of Commerce	165.11%	164.70%	-0.41%	-0.25%
Allied Banking Corporation	65.12%	64.41%	-0.71%	-1.09%
Bangkok Bank Public Co. Ltd	2.39%	2.35%	-0.04%	-1.68%
Philippine Trust Company	50.51%	49.11%	-1.41%	-2.78%
Development Bank of the Philippines	48.68%	46.81%	-1.87%	-3.84%
Metropolitan Bank & Trust Company	61.57%	58.94%	-2.63%	-4.27%
Korea Exchange Bank	116.09%	110.69%	-5.40%	-4.65%
Philippine Bank of Communications	167.10%	158.86%	-8.23%	-4.93%
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%
The Bank of Tokyo - Mitsubishi UFJ Ltd	10.93%	10.17%	-0.76%	-6.98%
Bank of America N.A.	4.26%	3.96%	-0.30%	-7.14%
China Banking Corporation	59.65%	53.38%	-6.27%	-10.51%
Philippine Veterans Bank	116.61%	102.14%	-14.47%	-12.41%
Land Bank of the Philippines	62.73%	54.31%	-8.42%	-13.43%
Standard Chartered Bank	210.69%	177.56%	-33.14%	-15.73%
Citibank N.A.	336.10%	252.77%	-83.32%	-24.79%
Banco De Oro Unibank	65.94%	48.21%	-17.73%	-26.88%
Security Bank Corporation	39.09%	24.36%	-14.72%	-37.67%
Deutsche Bank AG	172.89%	92.81%	-80.08%	-46.32%
Internationale Nederlanden Groep BK	87.02%	25.31%	-61.71%	-70.92%
Grand Total	81.71%	72.88%	-8.83%	-10.81%

Source: www.bsp.gov.ph

Philippine Universal and Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
June 30, 2012 to September 30, 2012
In PhP
		June 30, 2012				September 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 %)
Bank of China Limited - Manila Branch	5,405,705,862.53	676,326,353.64	799.27%		5,499,250,349.88	674,694,698.46	815.07%		93,544,487.35	-1,631,655.18	15.80%		1.73%	-0.24%	1.98%
United Coconut Planters Bank	58,788,229,194.25	9,044,452,080.29	649.99%		57,684,765,438.46	8,345,167,762.71	691.24%		-1,103,463,755.79	-699,284,317.58	41.24%		-1.88%	-7.73%	6.35%
Citibank N.A.	43,517,279,276.49	12,947,871,227.56	336.10%		32,833,020,831.09	12,989,088,119.39	252.77%		-10,684,258,445.40	41,216,891.83	-83.32%		-24.55%	0.32%	-24.79%
Standard Chartered Bank	5,949,712,292.86	2,823,851,791.39	210.69%		5,005,651,960.87	2,819,162,911.12	177.56%		-944,060,331.99	-4,688,880.27	-33.14%		-15.87%	-0.17%	-15.73%
Bank of Commerce	32,829,846,240.56	19,883,188,091.20	165.11%		32,651,852,421.91	19,825,006,462.21	164.70%		-177,993,818.65	-58,181,628.99	-0.41%		-0.54%	-0.29%	-0.25%
Philippine Bank of Communications	8,982,915,157.84	5,375,920,381.27	167.10%		8,517,589,737.08	5,361,593,642.74	158.86%		-465,325,420.76	-14,326,738.53	-8.23%		-5.18%	-0.27%	-4.93%
Philippine National Bank	59,734,643,323.51	41,035,624,017.49	145.57%		50,799,838,940.95	32,504,359,516.71	156.29%		-8,934,804,382.56	-8,531,264,500.78	10.72%		-14.96%	-20.79%	7.36%
Korea Exchange Bank	679,346,318.32	585,197,642.77	116.09%		659,493,409.58	595,807,841.52	110.69%		-19,852,908.74	10,610,198.75	-5.40%		-2.92%	1.81%	-4.65%
Philippine Veterans Bank	7,345,774,272.58	6,299,438,025.35	116.61%		6,780,597,813.35	6,638,430,212.16	102.14%		-565,176,459.23	338,992,186.81	-14.47%		-7.69%	5.38%	-12.41%
Mega International Commercial Bank Company Limited	554,443,146.65	773,440,353.49	71.69%		762,510,428.62	788,932,134.30	96.65%		208,067,281.97	15,491,780.81	24.97%		37.53%	2.00%	34.83%
Deutsche Bank AG	2,447,977,790.34	1,415,912,691.23	172.89%		1,315,888,813.12	1,417,807,886.43	92.81%		-1,132,088,977.22	1,895,195.20	-80.08%		-46.25%	0.13%	-46.32%
Asia United Bank Corporation	10,330,877,520.13	11,633,890,525.31	88.80%		10,752,972,323.67	11,978,818,330.22	89.77%		422,094,803.54	344,927,804.91	0.97%		4.09%	2.96%	1.09%
Union Bank of the Philippines	37,057,875,238.54	43,813,870,129.41	84.58%		38,394,556,414.92	43,887,492,186.78	87.48%		1,336,681,176.38	73,622,057.37	2.90%		3.61%	0.17%	3.43%
HongKong & Shanghai Banking Corporation	3,767,660,649.19	5,318,385,931.73	70.84%		3,655,699,755.29	5,150,945,595.76	70.97%		-111,960,893.90	-167,440,335.97	0.13%		-2.97%	-3.15%	0.18%
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	211,427,528.12	-4.57%		-5.69%	0.57%	-6.23%
Allied Banking Corporation	13,293,564,136.14	20,414,316,567.43	65.12%		13,279,854,327.12	20,618,612,108.27	64.41%		-13,709,809.02	204,295,540.84	-0.71%		-0.10%	1.00%	-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	-146,860,973.83	-2.63%		-4.41%	-0.15%	-4.27%
Maybank Philippines Inc.	3,213,237,618.59	5,857,123,131.49	54.86%		3,323,846,393.57	5,814,812,043.44	57.16%		110,608,774.98	-42,311,088.05	2.30%		3.44%	-0.72%	4.19%
Land Bank of the Philippines	34,323,507,164.53	54,718,065,876.33	62.73%		27,972,005,647.66	51,508,971,680.69	54.31%		-6,351,501,516.87	-3,209,094,195.64	-8.42%		-18.50%	-5.86%	-13.43%
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	946,762,157.41	-6.27%		-8.32%	2.45%	-10.51%
JP Morgan Chase National Bank Association	118,057,556.01	1,397,724,000.00	8.45%		745,416,697.32	1,397,724,000.00	53.33%		627,359,141.31	0.00	44.88%		531.40%	0.00%	531.40%
Bank of the Philippine Islands	46,504,024,846.43	86,872,774,623.13	53.53%		43,970,127,077.78	87,241,945,395.08	50.40%		-2,533,897,768.65	369,170,771.95	-3.13%		-5.45%	0.42%	-5.85%
East West Banking Corporation	8,359,973,804.77	17,919,833,842.14	46.65%		9,107,712,599.78	18,274,068,390.58	49.84%		747,738,795.01	354,234,548.44	3.19%		8.94%	1.98%	6.83%
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	-134,152,552.92	-1.41%		-3.56%	-0.80%	-2.78%
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	43,760,809,056.88	-17.73%		-0.44%	36.16%	-26.88%
Development Bank of the Philippines	17,429,510,384.31	35,802,778,658.05	48.68%		16,706,116,367.70	35,686,157,877.06	46.81%		-723,394,016.61	-116,620,780.99	-1.87%		-4.15%	-0.33%	-3.84%
Mizuho Corporate Bank Ltd. - Manila Branch	231,656,017.89	1,700,291,104.27	13.62%		584,697,791.26	1,626,550,127.94	35.95%		353,041,773.37	-73,740,976.33	22.32%		152.40%	-4.34%	163.84%
Internationale Nederlanden Groep BK	2,297,368,164.50	2,640,172,199.22	87.02%		670,240,278.79	2,648,446,754.05	25.31%		-1,627,127,885.71	8,274,554.83	-61.71%		-70.83%	0.31%	-70.92%
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	-75,078,317.44	-14.72%		-37.82%	-0.23%	-37.67%
Robinsons Bank Corporation	1,185,449,722.06	5,586,015,378.89	21.22%		1,212,428,304.10	5,604,797,239.62	21.63%		26,978,582.04	18,781,860.73	0.41%		2.28%	0.34%	1.93%
Chinatrust (Philippines) Commercial Banking Corporation	1,307,686,619.44	6,363,267,438.22	20.55%		1,304,469,684.46	6,351,881,327.94	20.54%		-3,216,934.98	-11,386,110.28	-0.01%		-0.25%	-0.18%	-0.07%
ANZ Banking Group Ltd	177,798,100.43	2,481,489,811.94	7.16%		484,915,387.63	2,461,442,124.07	19.70%		307,117,287.20	-20,047,687.87	12.54%		172.73%	-0.81%	174.96%
Al-Amanah Islamic Bank of the Philippines	84,112,650.05	493,191,649.00	17.05%		85,395,047.44	456,309,084.47	18.71%		1,282,397.39	-36,882,564.53	1.66%		1.52%	-7.48%	9.73%
The Bank of Tokyo - Mitsubishi UFJ Ltd	117,537,674.60	1,075,343,701.11	10.93%		109,327,678.10	1,075,343,701.11	10.17%		-8,209,996.50	0.00	-0.76%		-6.98%	0.00%	-6.98%
Bank of America N.A.	25,691,904.80	602,446,709.20	4.26%		23,912,893.44	603,846,709.20	3.96%		-1,779,011.36	1,400,000.00	-0.30%		-6.92%	0.23%	-7.14%
BDO Private Bank, Inc.	176,561,855.52	5,079,157,036.06	3.48%		167,156,062.49	4,778,546,612.60	3.50%		-9,405,793.03	-300,610,423.46	0.02%		-5.33%	-5.92%	0.63%
Bangkok Bank Public Co. Ltd	28,734,990.68	1,203,755,981.00	2.39%		28,423,142.55	1,211,004,687.00	2.35%		-311,848.13	7,248,706.00	-0.04%		-1.09%	0.60%	-1.68%
Grand Total	618,718,136,740.34	757,196,410,233.81	81.71%		575,943,378,881.40	790,261,967,346.05	72.88%		-42,774,757,858.94	33,065,557,112.24	-8.83%		-6.91%	4.37%	-10.81%

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 June 30, 2012 and September 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.