Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012

Last July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged banks, particularly Universal and Commercial Banks that continue to reflect unbooked losses or "deferred charges" on their balance sheets, to charge those losses against retained earnings.  This implies that the BSP now considers that these banks have amassed so much in retained earnings that "they can now afford to absorb higher charges without impairing their capital and also without making their shareholders unhappy."

We answered this question for Universal and Commercial Banks in a previous blog post (See: "Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012"  But can thrift banks do so? The answer is: yes but only for some banks.  As can be seen from the table below, seven banks have the Stockholders Equity (SE) to absorb these Deferred Charges:

1. Bataan Development Bank (Deferred Charges of 17.93% of SE)
2. Planters Development Bank (15.73% of SE)
3. Citibank Savings Inc. (9.09% of SE)
4. Card SME Bank Inc, (3.01% of SE)
5. Wealth Bank (1.76% of SE)
6. Security Bank Savings Corporation (0.20% of SE)
7. Farmers Savings & Loan Bank (0.00% of SE)

It must be noted that three of these banks are considered borderline insolvent (highlighted in yellow): Bataan Development Bank, Planters Development Bank, and Farmers Savings & Loan Bank. For more information on distressed banks, please see the previous blog post: "Philippine Thrift Banks Deteriorate in the 3rd Quarter of 2012".

Retained Earnings

Only three banks have sufficient Retained Earnings (RE) to absorb their unbooked losses:

1. Planters Development Bank (Deferred Charges of 27.41% of RE)
2. Wealth Bank (Deferred Charges of 11.13% of RE)
3. Farmers Savings & Loan Bank (Deferred Charges 0.01% of RE)

For one of the banks, Deferred Charges will exceed their Retained Earnings:

1. Bataan Development Bank (Deferred Charges of 194.46% of RE)

Three of the banks have negative Retained Earnings.  As such, they may not have the capacity to absorb additional losses.

1. Security Bank Savings Corporation (Retained Earnings of PhP -564.714 million vs. Deferred Charges of PhP 1.452 million)
2. Citibank Savings Inc. (Retained Earnings of -2.373 billion vs. Deferred Charges of PhP 165.123 million)
3. Card SME Bank Inc. (Retained Earnings of PhP -36.186 million vs. Deferred Charges of PhP 5.555 million)

For more information of these Deferred Charges, please consult four previous blog posts

"Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - June 30, 2012", "Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings?", "Philippine Thrift Banks with Overstated Capital as of Year End 2011" and "BSP's Ampaw Accounting System".

Philippine Thrift Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholders Equity
In Php
September 30, 2012
Bank	Unbooked Losses	SE	Adjusted SE	Impact on SE
Bataan Development Bank	12,121,205.73	67,597,577.61	55,476,371.88	17.93%
Planters Development Bank	617,205,016.53	3,924,090,032.92	3,306,885,016.39	15.73%
Citibank Savings Inc.	165,122,557.37	1,817,029,562.88	1,651,907,005.51	9.09%
Card SME Bank Inc. (A Thrift Bank)	5,554,850.27	184,615,481.92	179,060,631.65	3.01%
Wealth Bank - A Development Bank	6,486,091.49	369,496,704.40	363,010,612.91	1.76%
Security Bank Savings Corporation	1,451,702.38	736,065,900.73	734,614,198.35	0.20%
Farmers Savings & Loan Bank	2,080.83	102,604,061.96	102,601,981.13	0.00%
Allied Savings Bank	0.00	956,183,719.07	956,183,719.07	0.00%
Bank One Savings and Trust Corp.	0.00	523,078,931.29	523,078,931.29	0.00%
Bataan SLA	0.00	74,116,683.86	74,116,683.86	0.00%
BDO Elite Savings Bank	0.00	1,539,407,664.50	1,539,407,664.50	0.00%
BPI Direct Savings Bank	0.00	739,167,639.63	739,167,639.63	0.00%
BPI Family Savings Bank	0.00	15,292,851,941.12	15,292,851,941.12	0.00%
BPI Globe Banko Inc. Savings Bank	0.00	349,094,796.54	349,094,796.54	0.00%
Business & Consumers Bank	0.00	80,158,164.99	80,158,164.99	0.00%
Century Savings Bank	0.00	893,351,154.16	893,351,154.16	0.00%
China Bank Savings	0.00	1,109,583,840.73	1,109,583,840.73	0.00%
City Savings Bank	0.00	2,103,900,942.28	2,103,900,942.28	0.00%
CityState Savings Bank	0.00	782,398,842.10	782,398,842.10	0.00%
Comsavings Bank	0.00	352,249,570.43	352,249,570.43	0.00%
Cordillera Savings Bank	0.00	99,908,118.27	99,908,118.27	0.00%
Dumaguete City Development Bank	0.00	210,023,861.68	210,023,861.68	0.00%
Dungganon Bank	0.00	64,495,286.01	64,495,286.01	0.00%
Equicom SB	0.00	463,045,239.53	463,045,239.53	0.00%
First Consolidated Bank	0.00	1,740,308,076.63	1,740,308,076.63	0.00%
Hiyas Savings & Loan Bank	0.00	159,176,956.30	159,176,956.30	0.00%
HSBC Savings Bank (Phils) Inc.	0.00	3,068,645,532.31	3,068,645,532.31	0.00%
Iloilo City Development Bank	0.00	64,575,154.89	64,575,154.89	0.00%
Isla Bank (A Thrift Bank) Inc.	0.00	632,239,119.74	632,239,119.74	0.00%
Legazpi Savings Bank Inc.	0.00	181,260,590.59	181,260,590.59	0.00%
Lemery Savings & Loan Bank, Inc.	0.00	70,264,263.50	70,264,263.50	0.00%
Life Savings Bank	0.00	63,720,809.87	63,720,809.87	0.00%
Luzon Development Bank	0.00	406,399,302.47	406,399,302.47	0.00%
Malasiqui Progressive SLB, Inc.	0.00	50,112,079.58	50,112,079.58	0.00%
Malayan Bank Savings & Mortgage Bank	0.00	1,030,272,614.97	1,030,272,614.97	0.00%
Maritime SLA	0.00	66,102,437.80	66,102,437.80	0.00%
Merchants Savings & Loan Association Inc.	0.00	6,502,899,210.43	6,502,899,210.43	0.00%
Metro Cebu Public Savings Bank	0.00	65,801,135.23	65,801,135.23	0.00%
Microfinance Maximum SB (Maxbank)	0.00	62,487,046.42	62,487,046.42	0.00%
Northpoint Development Bank	0.00	78,747,771.22	78,747,771.22	0.00%
Opportunity Kauswagan Bank, Inc.	0.00	94,831,661.78	94,831,661.78	0.00%
Optimum Development Bank	0.00	674,499,273.91	674,499,273.91	0.00%
Pacific Ace Savings Bank	0.00	73,164,054.62	73,164,054.62	0.00%
Pampanga Development Bank	0.00	107,312,295.20	107,312,295.20	0.00%
Penbank, Inc.	0.00	261,521,790.11	261,521,790.11	0.00%
Philippine Business Bank	0.00	4,371,356,169.80	4,371,356,169.80	0.00%
Philippine Postal Savings Bank	0.00	704,043,495.18	704,043,495.18	0.00%
Philippine Resources Savings Banking Corporation	0.00	1,251,275,177.34	1,251,275,177.34	0.00%
Philippine Savings Bank	0.00	13,537,819,146.69	13,537,819,146.69	0.00%
Pridestar Development Bank	0.00	67,592,604.71	67,592,604.71	0.00%
Producers Savings Bank	0.00	720,392,659.44	720,392,659.44	0.00%
Progress SLA	0.00	83,884,449.90	83,884,449.90	0.00%
Quezon Coconut Producers SLB Inc.	0.00	56,890,460.69	56,890,460.69	0.00%
RCBC Savings Bank	0.00	7,166,281,446.81	7,166,281,446.81	0.00%
Sampaguita SLA	0.00	48,493,348.43	48,493,348.43	0.00%
Silangan Savings and Loan Bank, Inc.	0.00	10,342,100.23	10,342,100.23	0.00%
Sterling Bank of Asia Inc.	0.00	1,696,273,590.30	1,696,273,590.30	0.00%
Sun Savings Bank	0.00	73,533,260.75	73,533,260.75	0.00%
The Queen City Development Bank	0.00	673,148,238.43	673,148,238.43	0.00%
The Real Bank (A Thrift Bank) Inc.	0.00	406,449,689.71	406,449,689.71	0.00%
Tong Yang Savings Bank Inc.	0.00	406,849,416.47	406,849,416.47	0.00%
Tower Development Bank	0.00	115,889,336.63	115,889,336.63	0.00%
UCPB Savings Bank	0.00	2,219,668,705.76	2,219,668,705.76	0.00%
United Overseas Bank Philippines	0.00	706,325,774.05	706,325,774.05	0.00%
University Savings Bank	0.00	209,250,986.29	209,250,986.29	0.00%
Village SLA, Inc.	0.00	71,806,327.58	71,806,327.58	0.00%
World Partners Bank (A Thrift Bank)	0.00	159,152,523.60	159,152,523.60	0.00%
Grand Total	807,943,504.60	83,045,575,804.97	82,237,632,300.37	0.97%

Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In PHP
September 30, 2012
Bank	Unbooked Losses	RE	Adjusted RE	Impact on RE
Bataan Development Bank	12,121,205.73	6,233,351.72	-5,887,854.01	194.46%
Planters Development Bank	617,205,016.53	2,251,768,609.03	1,634,563,592.50	27.41%
Wealth Bank - A Development Bank	6,486,091.49	58,292,811.57	51,806,720.08	11.13%
Farmers Savings & Loan Bank	2,080.83	31,002,310.97	31,000,230.14	0.01%
Security Bank Savings Corporation	1,451,702.38	-564,714,698.82	-566,166,401.20	-0.26%
Citibank Savings Inc.	165,122,557.37	-2,373,358,812.86	-2,538,481,370.23	-6.96%
Card SME Bank Inc. (A Thrift Bank)	5,554,850.27	-36,186,335.58	-41,741,185.85	-15.35%
Grand Total	807,943,504.60	-626,962,763.97	-1,434,906,268.57	-128.87%

Source: www.bsp.gov.ph