A Simple Stress Test of Philippine Thrift Banks as of December 31, 2012

Editor's Note: This is an updated version of an earlier blog post entitled: "A Simple Stress Test of Philippine Thrift Banks as of September 30, 2012".


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 71.727 billion or 8.46% of the PhP 847.757 billion in Stockholders Equity (SE) as of December 31, 2012.  So, writing off 50% of the Philippine Commercial Banking NPLs would reduce their aggregate stockholders equity by a little more than 4%.

For Philippine Thrift Banks, the NPL levels are much higher on a relative basis.  As of December 31, 2012, Philippine Thrift Bank NPLs amounted to PhP 24.705 billion or 30.50% of the PhP 81.006 billion of Stockholders Equity of the Philippine Thrift Banking System for the same period.  This is more than 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 more than 15%.  Naturally, some banks would be more affected than others.  (Weak banks are highlighted in yellow.  For more information regarding this, please read "Philippine Thrift Banks Deteriorate in the 4th Quarter of 2012").

The stockholder's equity of one bank's equity, The Real Bank,  would be completely wiped out. One other bank, Citibank Savings, Inc., would experience a near wipe-out of its stockholder's 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.  Seven other banks, namely, The Palawan Bank (56.10% decline in SE), Opportunity Kauswagan Bank, Inc. (51.82% decline in SE), Silangan Savings and Loan Bank, Inc. (39.88% decline in SE), Legazpi Development Bank (37.08% decline in SE), Planters Development Bank (36.19% decline in SE), Bataan Development Bank (32.87% decline in SE), Comsavings Bank (31.27% decline in SE), would be severely affected.

It should be noted that the stockholder's equity of one bank, Inter-Asia Development Bank, is already wiped out at a negative Php 16.307 million.  However, due to other capital accounts, and loan loss reserves, its Total Capital Cushion stands at a positive Php 12.527 million.

Philippine Thrift Banking System
NPL as % of SE
December 31, 2012
	NPL	SE	NPL/SE
Bank	(In PHP)	(In PHP)	(In %)
The Real Bank (A Thrift Bank) Inc.	3,222,766,850.29	1,265,377,014.80	254.69%
Citibank Savings Inc.	2,486,951,318.70	1,471,728,852.82	168.98%
The Palawan Bank	18,704,567.06	16,669,997.10	112.20%
Opportunity Kauswagan Bank, Inc.	83,197,928.00	80,270,857.14	103.65%
Silangan Savings and Loan Bank, Inc.	8,315,990.48	10,426,695.85	79.76%
Legazpi Savings Bank Inc.	136,824,757.59	184,484,675.09	74.17%
Planters Development Bank	2,847,117,574.72	3,933,416,724.92	72.38%
Bataan Development Bank	43,500,675.28	66,174,804.97	65.74%
Comsavings Bank	206,029,584.59	329,437,343.85	62.54%
Philippine Postal Savings Bank	429,267,774.36	720,553,426.82	59.57%
Security Bank Savings Corporation	593,194,254.69	1,164,978,185.29	50.92%
Luzon Development Bank	195,318,430.22	430,630,148.29	45.36%
Sterling Bank of Asia Inc.	813,196,974.83	1,925,297,568.78	42.24%
Pampanga Development Bank	46,551,826.06	110,544,474.60	42.11%
Farmers Savings & Loan Bank	37,600,994.00	100,560,559.07	37.39%
Village SLA, Inc.	26,263,990.41	71,843,132.74	36.56%
Allied Savings Bank	327,204,614.68	965,096,245.83	33.90%
Philippine Savings Bank	4,485,056,371.34	14,057,478,857.55	31.91%
Philippine Resources Savings Banking Corporation	405,464,203.96	1,292,900,034.16	31.36%
Malayan Bank Savings & Mortgage Bank	321,929,248.00	1,035,267,589.45	31.10%
Malasiqui Progressive SLB, Inc.	14,315,768.15	49,987,515.03	28.64%
Penbank, Inc.	74,320,872.77	260,777,698.81	28.50%
BPI Globe Banko Inc. Savings Bank	120,129,632.77	430,485,231.40	27.91%
Hiyas Savings & Loan Bank	44,585,516.05	160,302,962.64	27.81%
Tong Yang Savings Bank Inc.	109,111,957.87	407,290,508.71	26.79%
University Savings Bank	50,160,494.53	206,480,660.11	24.29%
BPI Direct Savings Bank	174,258,655.61	773,096,878.68	22.54%
Sampaguita SLA	11,229,144.04	50,542,973.94	22.22%
BPI Family Savings Bank	3,548,824,537.29	16,011,851,692.99	22.16%
Iloilo City Development Bank	14,869,625.86	67,932,197.37	21.89%
Equicom SB	101,692,569.70	468,281,883.21	21.72%
First Consolidated Bank	387,125,970.42	1,837,644,911.58	21.07%
Lemery Savings & Loan Bank, Inc.	13,752,022.51	69,458,939.81	19.80%
Wealth Bank - A Development Bank	73,493,574.61	376,293,333.07	19.53%
RCBC Savings Bank	1,406,564,983.60	7,471,776,051.03	18.83%
World Partners Bank (A Thrift Bank)	29,262,890.43	156,031,013.98	18.75%
Cordillera Savings Bank	19,364,067.30	104,333,928.64	18.56%
Maritime SLA	11,009,354.29	66,825,925.53	16.47%
Producers Savings Bank	150,342,450.09	1,015,203,873.52	14.81%
Philippine Business Bank	626,147,411.17	4,366,201,214.92	14.34%
Business & Consumers Bank	10,741,580.17	76,198,635.89	14.10%
UCPB Savings Bank	294,135,575.67	2,309,192,732.36	12.74%
Quezon Coconut Producers SLB Inc.	7,095,575.02	56,803,234.03	12.49%
Dungganon Bank	6,633,120.66	64,165,815.17	10.34%
Pridestar Development Bank	7,066,828.55	68,537,310.54	10.31%
Dumaguete City Development Bank	22,162,072.29	218,863,506.18	10.13%
Metro Cebu Public Savings Bank	6,811,800.97	69,109,884.69	9.86%
City Savings Bank	213,188,951.25	2,300,189,245.06	9.27%
Pacific Ace Savings Bank	6,811,790.66	73,957,223.31	9.21%
Century Savings Bank	79,152,574.58	899,914,431.63	8.80%
China Bank Savings	92,723,003.28	1,082,690,980.75	8.56%
Life Savings Bank	5,137,364.70	64,237,143.98	8.00%
The Queen City Development Bank	47,111,032.75	668,964,003.13	7.04%
Northpoint Development Bank	4,600,700.26	72,734,632.66	6.33%
Card SME Bank Inc. (A Thrift Bank)	11,586,934.61	197,354,860.15	5.87%
CityState Savings Bank	30,994,531.21	789,176,374.21	3.93%
Bank One Savings and Trust Corp.	20,048,326.36	528,138,788.26	3.80%
Tower Development Bank	4,161,446.13	113,310,987.90	3.67%
HSBC Savings Bank (Phils) Inc.	89,684,229.65	3,145,449,733.35	2.85%
Microfinance Maximum SB (Maxbank)	1,676,405.54	61,837,099.50	2.71%
Optimum Development Bank	13,702,260.73	685,288,993.87	2.00%
Progress SLA	1,342,455.20	83,696,908.36	1.60%
Merchants Savings & Loan Association Inc.	430,478.95	637,333,846.63	0.07%
BDO Elite Savings Bank	0.00	1,562,651,618.55	0.00%
Enterprise Bank Inc.	0.00	190,077,000.36	0.00%
Isla Bank (A Thrift Bank) Inc.	0.00	635,967,112.97	0.00%
Sun Savings Bank	0.00	76,708,561.42	0.00%
United Overseas Bank Philippines	0.00	705,498,454.77	0.00%
Inter-Asia Development Bank	12,449,224.59	-16,306,811.18	-76.34%
Bataan SLA	NA	NA	NA
Grand Total	24,704,467,692.10	81,005,678,892.59	30.50%

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:

1. Loans especially mentioned because they have potential weaknesses that deserve Management's close attention;
2. 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;
3. 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;
4. 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.

The circular mandates that an allowance for probable losses should be set up in accordance with the following schedule:

1. Loans Especially Mentioned: 5%
2. Substandard - Secured: 6% - 25%
3. Substandard - Unsecured: 25%
4. Doubtful: 50%
5. Loss: 100%

 As of December 30, 2012, "Classified Loans and Other Risky Assets" of the Philippine Thrift Banking System amounted to PhP 61.508 billion or almost 2.5 times the size of the thrift banking system NPLs of PhP 24.705 billion for the same period.  Consequently, any write-offs of Classified Loans will have almost three times the impact of an NPL write-off.

Philippine Thrift Banking System
Classified Loans vs. NPLs
December 31, 2012
	Classified Loans	NPLs	Classified Loans/NPLs
Bank	(In Php)	(In Php)	(In %)
The Real Bank (A Thrift Bank) Inc.	7,365,466,009.06	11,229,144.04	65592.41%
Security Bank Savings Corporation	1,832,207,546.10	8,315,990.48	22032.34%
Life Savings Bank	171,683,414.25	5,137,364.70	3341.86%
Philippine Savings Bank	12,103,215,539.95	405,464,203.96	2985.03%
Iloilo City Development Bank	298,585,142.94	14,869,625.86	2008.02%
Village SLA, Inc.	449,504,632.00	26,263,990.41	1711.49%
China Bank Savings	1,536,101,233.09	92,723,003.28	1656.66%
Bank One Savings and Trust Corp.	205,075,040.39	20,048,326.36	1022.90%
Business & Consumers Bank	83,632,670.01	10,741,580.17	778.59%
Dumaguete City Development Bank	169,540,000.00	22,162,072.29	765.00%
RCBC Savings Bank	8,915,418,143.00	1,406,564,983.60	633.84%
Inter-Asia Development Bank	77,098,031.13	12,449,224.59	619.30%
Comsavings Bank	1,275,879,789.57	206,029,584.59	619.27%
University Savings Bank	301,881,570.73	50,160,494.53	601.83%
Legazpi Savings Bank Inc.	627,281,000.00	136,824,757.59	458.46%
Tower Development Bank	16,820,545.00	4,161,446.13	404.20%
CityState Savings Bank	109,707,511.72	30,994,531.21	353.96%
Metro Cebu Public Savings Bank	21,788,122.03	6,811,800.97	319.86%
Equicom SB	318,414,084.49	101,692,569.70	313.11%
UCPB Savings Bank	871,879,199.72	294,135,575.67	296.42%
Malayan Bank Savings & Mortgage Bank	943,996,690.79	321,929,248.00	293.23%
Farmers Savings & Loan Bank	108,830,885.36	37,600,994.00	289.44%
BPI Globe Banko Inc. Savings Bank	347,171,299.46	120,129,632.77	289.00%
Progress SLA	3,571,915.60	1,342,455.20	266.07%
HSBC Savings Bank (Phils) Inc.	225,365,387.78	89,684,229.65	251.29%
Bataan Development Bank	102,400,000.00	43,500,675.28	235.40%
First Consolidated Bank	809,084,393.84	387,125,970.42	209.00%
Tong Yang Savings Bank Inc.	221,895,055.32	109,111,957.87	203.36%
Quezon Coconut Producers SLB Inc.	14,406,237.66	7,095,575.02	203.03%
BPI Family Savings Bank	7,144,944,313.26	3,548,824,537.29	201.33%
Penbank, Inc.	146,700,941.96	74,320,872.77	197.39%
Cordillera Savings Bank	38,180,991.33	19,364,067.30	197.17%
Philippine Business Bank	1,184,818,220.39	626,147,411.17	189.22%
Merchants Savings & Loan Association Inc.	795,000.00	430,478.95	184.68%
Planters Development Bank	5,015,541,380.46	2,847,117,574.72	176.16%
Maritime SLA	18,463,195.45	11,009,354.29	167.70%
Producers Savings Bank	242,913,468.11	150,342,450.09	161.57%
Allied Savings Bank	398,214,763.48	327,204,614.68	121.70%
Philippine Postal Savings Bank	489,404,754.28	429,267,774.36	114.01%
Dungganon Bank	7,410,175.55	6,633,120.66	111.71%
Citibank Savings Inc.	2,732,079,124.20	2,486,951,318.70	109.86%
City Savings Bank	233,835,797.02	213,188,951.25	109.68%
BPI Direct Savings Bank	188,361,996.97	174,258,655.61	108.09%
Lemery Savings & Loan Bank, Inc.	13,764,073.96	13,752,022.51	100.09%
Card SME Bank Inc. (A Thrift Bank)	11,586,934.61	11,586,934.61	100.00%
Century Savings Bank	79,152,574.58	79,152,574.58	100.00%
Hiyas Savings & Loan Bank	44,585,516.05	44,585,516.05	100.00%
Malasiqui Progressive SLB, Inc.	14,315,768.15	14,315,768.15	100.00%
Microfinance Maximum SB (Maxbank)	1,676,405.54	1,676,405.54	100.00%
Northpoint Development Bank	4,600,700.26	4,600,700.26	100.00%
Opportunity Kauswagan Bank, Inc.	83,197,928.00	83,197,928.00	100.00%
Optimum Development Bank	13,702,260.73	13,702,260.73	100.00%
Pacific Ace Savings Bank	6,811,790.66	6,811,790.66	100.00%
Pampanga Development Bank	46,551,826.06	46,551,826.06	100.00%
Pridestar Development Bank	7,066,828.55	7,066,828.55	100.00%
Wealth Bank - A Development Bank	73,493,574.61	73,493,574.61	100.00%
World Partners Bank (A Thrift Bank)	29,262,890.43	29,262,890.43	100.00%
Luzon Development Bank	192,710,117.71	195,318,430.22	98.66%
The Palawan Bank Inc.	18,704,567.06	47,111,032.75	39.70%
Philippine Resources Savings Banking Corporation	1,655,999,037.20	4,485,056,371.34	36.92%
Sun Savings Bank	5,199,118.79	18,704,567.06	27.80%
Sampaguita SLA	28,500,583.91	593,194,254.69	4.80%
The Queen City Development Bank	75,766,048.80	3,222,766,850.29	2.35%
Silangan Savings and Loan Bank, Inc.	16,384,090.99	813,196,974.83	2.01%
BDO Elite Savings Bank	0.00	0.00	NA
Enterprise Bank Inc.	0.00	0.00	NA
Isla Bank (A Thrift Bank) Inc.	34,550,874.58	0.00	NA
Sterling Bank of Asia Inc.	813,196,974.83	0.00	NA
United Overseas Bank Philippines	867,269,011.62	0.00	NA
Bataan SLA	NA	NA	NA
Grand Total	61,507,614,711.13	24,704,467,692.10	248.97%

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 70.08% of the PhP 87.764 billion in Total Capital Cushion of Philippine Thrift Banks as of December 31, 2012.

Philippine Thrift Banking System
Classified Loans as % of Total Capital Cushion
December 31, 2012
	Classified Loans	Total Capital Cushion	Classified Loans/Total Capital Cushion
Bank	(In Php)	(In Php)	(In %)
The Real Bank (A Thrift Bank) Inc.	7,365,466,009.06	819,806,739.79	898.44%
Inter-Asia Development Bank	77,098,031.13	12,527,419.93	615.43%
Village SLA, Inc.	449,504,632.00	85,106,104.94	528.17%
Iloilo City Development Bank	298,585,142.94	66,532,072.05	448.78%
Comsavings Bank	1,275,879,789.57	394,231,674.83	323.64%
Life Savings Bank	171,683,414.25	65,456,807.08	262.29%
Legazpi Savings Bank Inc.	627,281,000.00	361,050,520.81	173.74%
China Bank Savings	1,536,101,233.09	911,544,737.69	168.52%
University Savings Bank	301,881,570.73	228,612,951.12	132.05%
Bataan Development Bank	102,400,000.00	77,754,277.41	131.70%
Philippine Resources Savings Banking Corporation	1,655,999,037.20	1,280,833,710.22	129.29%
RCBC Savings Bank	8,915,418,143.00	7,182,065,835.47	124.13%
Planters Development Bank	5,015,541,380.46	4,476,918,961.89	112.03%
Business & Consumers Bank	83,632,670.01	79,778,218.98	104.83%
Farmers Savings & Loan Bank	108,830,885.36	120,105,189.66	90.61%
Security Bank Savings Corporation	1,832,207,546.10	2,117,832,548.04	86.51%
Malayan Bank Savings & Mortgage Bank	943,996,690.79	1,150,906,649.00	82.02%
Dumaguete City Development Bank	169,540,000.00	217,297,074.83	78.02%
Philippine Savings Bank	12,103,215,539.95	16,065,835,469.57	75.34%
The Palawan Bank Inc.	18,704,567.06	25,911,081.73	72.19%
Citibank Savings Inc.	2,732,079,124.20	3,917,361,113.08	69.74%
Equicom SB	318,414,084.49	526,478,368.74	60.48%
United Overseas Bank Philippines	867,269,011.62	1,444,345,423.54	60.05%
Philippine Postal Savings Bank	489,404,754.28	877,330,533.58	55.78%
Penbank, Inc.	146,700,941.96	285,232,586.90	51.43%
Opportunity Kauswagan Bank, Inc.	83,197,928.00	170,899,309.83	48.68%
BPI Family Savings Bank	7,144,944,313.26	15,860,798,666.60	45.05%
BPI Globe Banko Inc. Savings Bank	347,171,299.46	782,143,645.87	44.39%
First Consolidated Bank	809,084,393.84	1,970,817,172.11	41.05%
Bank One Savings and Trust Corp.	205,075,040.39	522,793,794.10	39.23%
Luzon Development Bank	192,710,117.71	492,360,638.92	39.14%
Sterling Bank of Asia Inc.	813,196,974.83	2,083,878,433.82	39.02%
Allied Savings Bank	398,214,763.48	1,029,058,182.69	38.70%
Pampanga Development Bank	46,551,826.06	126,267,718.61	36.87%
Tong Yang Savings Bank Inc.	221,895,055.32	627,270,962.27	35.37%
Sampaguita SLA	28,500,583.91	84,232,190.43	33.84%
UCPB Savings Bank	871,879,199.72	2,579,430,757.11	33.80%
Silangan Savings and Loan Bank, Inc.	16,384,090.99	51,238,430.87	31.98%
Cordillera Savings Bank	38,180,991.33	123,806,190.07	30.84%
Philippine Business Bank	1,184,818,220.39	3,852,281,882.85	30.76%
Metro Cebu Public Savings Bank	21,788,122.03	71,210,205.16	30.60%
Maritime SLA	18,463,195.45	69,271,831.58	26.65%
Hiyas Savings & Loan Bank	44,585,516.05	175,599,508.50	25.39%
Malasiqui Progressive SLB, Inc.	14,315,768.15	57,487,437.99	24.90%
Quezon Coconut Producers SLB Inc.	14,406,237.66	58,253,245.56	24.73%
BPI Direct Savings Bank	188,361,996.97	787,541,250.61	23.92%
Producers Savings Bank	242,913,468.11	1,045,373,505.87	23.24%
Lemery Savings & Loan Bank, Inc.	13,764,073.96	74,467,764.45	18.48%
Wealth Bank - A Development Bank	73,493,574.61	417,967,098.12	17.58%
World Partners Bank (A Thrift Bank)	29,262,890.43	182,889,092.93	16.00%
Tower Development Bank	16,820,545.00	115,765,899.34	14.53%
CityState Savings Bank	109,707,511.72	808,185,795.23	13.57%
City Savings Bank	233,835,797.02	1,947,420,462.29	12.01%
Dungganon Bank	7,410,175.55	62,935,596.15	11.77%
The Queen City Development Bank	75,766,048.80	678,792,264.05	11.16%
Pridestar Development Bank	7,066,828.55	74,627,626.02	9.47%
Century Savings Bank	79,152,574.58	873,232,215.08	9.06%
Pacific Ace Savings Bank	6,811,790.66	75,921,914.77	8.97%
HSBC Savings Bank (Phils) Inc.	225,365,387.78	2,861,807,423.16	7.87%
Sun Savings Bank	5,199,118.79	77,692,055.29	6.69%
Card SME Bank Inc. (A Thrift Bank)	11,586,934.61	201,058,032.28	5.76%
Isla Bank (A Thrift Bank) Inc.	34,550,874.58	631,893,880.25	5.47%
Northpoint Development Bank	4,600,700.26	93,901,080.98	4.90%
Progress SLA	3,571,915.60	83,990,340.37	4.25%
Microfinance Maximum SB (Maxbank)	1,676,405.54	61,231,684.17	2.74%
Optimum Development Bank	13,702,260.73	675,732,293.95	2.03%
Merchants Savings & Loan Association Inc.	795,000.00	640,602,537.64	0.12%
BDO Elite Savings Bank	0.00	1,507,557,562.16	0.00%
Enterprise Bank Inc.	0.00	203,469,413.04	0.00%
Bataan SLA	NA	0.00	NA
Grand Total	61,507,614,711.13	87,764,013,064.02	70.08%

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 70.08% 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 7.01% and a 50% write-off of classified loans will reduce the thrift banking system's Total Capital Cushion by 35.04%.

Individual Banks

A 10% write-off of Classified Loans would nearly wipe out the Total Capital Cusion of one bank (The Real Bank) and severely impact (by 30% or more) the Total Capital Cushion of  four more banks (severely affected banks highlighted in yellow).

1. The Real Bank (89.84% reduction in Total Capital Cushion)
2. Inter-Asia Development Bank (61.54% reduction in Total Capital Cushion)
3. Village SLA, Inc. (52.82% reduction in Total Capital Cushion)
4. Iloilo City Development Bank (44.88% reduction in Total Capital Cushion)
5. Comsavings Bank (32.36% reduction in Total Capital Cushion)

A 20% write-off of Classified Loans will totally wipe out the Total Capital Cushion of three banks and severely impact the Total Capital Cushion of five more banks:

1. The Real Bank (179.69% reduction in Total Capital Cushion)
2. Inter-Asia Development Bank (123.09% in Total Capital Cushion)
3. Village SLA, Inc. (104.83% reduction in Total Capital Cushion)
4. Iloilo City Development Bank (89.76% reduction in Total Capital Cushion)
5. Comsavings Bank (64.73% reduction in Total Capital Cushion)
6. Life Savings Bank (52.46% reduction in Total Capital Cushion)
7. Legazpi Savings Bank Inc. (34.75% reduction in Total Capital Cushion)
8. China Bank Savings (33.70% reduction in Total Capital Cushion)

A 30% 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 ten other banks:

1. The Real Bank (269.53% reduction in Total Capital Cushion)
2. Inter-Asia Development Bank (184.63% in Total Capital Cushion)
3. Village SLA, Inc. (158.45% reduction in Total Capital Cushion)
4. Iloilo City Development Bank (134.64% reduction in Total Capital Cushion)
5. Comsavings Bank (97.09% reduction in Total Capital Cushion)
6. Life Savings Bank (78.69% reduction in Total Capital Cushion)
7. Legazpi Savings Bank Inc. (52.12% reduction in Total Capital Cushion)
8. China Bank Savings (50.55% reduction in Total Capital Cushion)
9. University Savings Bank (39.61% reduction in Total Capital Cushion)
10. Bataan Development Bank (39.61% reduction in Total Capital Cushion)
11. Philippine Resources Savings Banking Corporation (38.79% reduction in Total Capital Cushion)
12. RCBC Savings Bank (37.24% reduction in Total Capital Cushion)
13. Planters Development Bank (33.61% reduction in Total Capital Cushion)
14. Business & Consumers Bank (31.45% reduction in Total Capital Cushion)

A 40% write-off of Classified Loans will totally wipe out the Total Capital Cushion of six banks and severely affect (reduce by 30% or more) the Total Capital Cushion of thirteen more banks:

1. The Real Bank (359.38% reduction in Total Capital Cushion)
2. Inter-Asia Development Bank (246.17% in Total Capital Cushion)
3. Village SLA, Inc. (211.27% reduction in Total Capital Cushion)
4. Iloilo City Development Bank (179.51% reduction in Total Capital Cushion)
5. Comsavings Bank (129.45% reduction in Total Capital Cushion)
6. Life Savings Bank (104.91% reduction in Total Capital Cushion)
7. Legazpi Savings Bank Inc. (69.50% reduction in Total Capital Cushion)
8. China Bank Savings (67.41% reduction in Total Capital Cushion)
9. University Savings Bank (52.82% reduction in Total Capital Cushion)
10. Bataan Development Bank (52.68% reduction in Total Capital Cushion)
11. Philippine Resources Savings Banking Corporation (51.72% reduction in Total Capital Cushion)
12. RCBC Savings Bank (49.65% reduction in Total Capital Cushion)
13. Planters Development Bank (44.81% reduction in Total Capital Cushion)
14. Business & Consumers Bank (41.93% reduction in Total Capital Cushion)
15. Farmers Savings & Loan Bank (36.25% reduction in Total Capital Cushion)
16. Security Bank Savings Corporation (34.61% reduction in Total Capital Cushion)
17. Malayan Bank Savings & Mortgage Bank (32.81% reduction in Total Capital Cushion)
18. Dumaguete City Development Bank (31.21% reduction in Total Capital Cushion)
19. Philippine Savings Bank (30.13% reduction in Total Capital Cushion)

A 50% write-off of Classified Loans will totally wipe out the Total Capital Cushion of six banks and severely affect (reduce by 30% or more) the Total Capital Cushion of seventeen more banks:

1. The Real Bank (449.22% reduction in Total Capital Cushion)
2. Inter-Asia Development Bank (307.72% in Total Capital Cushion)
3. Village SLA, Inc. (264.08% reduction in Total Capital Cushion)
4. Iloilo City Development Bank (224.39% reduction in Total Capital Cushion)
5. Comsavings Bank (161.82% reduction in Total Capital Cushion)
6. Life Savings Bank (131.14% reduction in Total Capital Cushion)
7. Legazpi Savings Bank Inc. (86.87% reduction in Total Capital Cushion)
8. China Bank Savings (84.26% reduction in Total Capital Cushion)
9. University Savings Bank (66.02% reduction in Total Capital Cushion)
10. Bataan Development Bank (65.85% reduction in Total Capital Cushion)
11. Philippine Resources Savings Banking Corporation (64.65% reduction in Total Capital Cushion)
12. RCBC Savings Bank (62.07% reduction in Total Capital Cushion)
13. Planters Development Bank (56.02% reduction in Total Capital Cushion)
14. Business & Consumers Bank (52.42% reduction in Total Capital Cushion)
15. Farmers Savings & Loan Bank (45.31% reduction in Total Capital Cushion)
16. Security Bank Savings Corporation (43.26% reduction in Total Capital Cushion)
17. Malayan Bank Savings & Mortgage Bank (41.01% reduction in Total Capital Cushion)
18. Dumaguete City Development Bank (39.01% reduction in Total Capital Cushion)
19. Philippine Savings Bank (37.67% reduction in Total Capital Cushion)
20. The Palawan Bank Inc. (36.09% reduction in Total Capital Cushion)
21. Citibank Savings Inc. (34.87% reduction in Total Capital Cushion)
22. Equicom SB (30.24% reduction in Total Capital Cushion)
23. United Overseas Bank Philippines (30.02% reduction in Total Capital Cushion)

Please bear in mind that a number of these banks are already very weak and are in distress.  Please see a previous blog post: "Philippine Thrift Banks Deteriorate in the 4th 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? - December 31, 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
December 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 %)
The Real Bank (A Thrift Bank) Inc.	7,365,466,009.06	819,806,739.79	89.84%	179.69%	269.53%	359.38%	449.22%
Inter-Asia Development Bank	77,098,031.13	12,527,419.93	61.54%	123.09%	184.63%	246.17%	307.72%
Village SLA, Inc.	449,504,632.00	85,106,104.94	52.82%	105.63%	158.45%	211.27%	264.08%
Iloilo City Development Bank	298,585,142.94	66,532,072.05	44.88%	89.76%	134.64%	179.51%	224.39%
Comsavings Bank	1,275,879,789.57	394,231,674.83	32.36%	64.73%	97.09%	129.45%	161.82%
Life Savings Bank	171,683,414.25	65,456,807.08	26.23%	52.46%	78.69%	104.91%	131.14%
Legazpi Savings Bank Inc.	627,281,000.00	361,050,520.81	17.37%	34.75%	52.12%	69.50%	86.87%
China Bank Savings	1,536,101,233.09	911,544,737.69	16.85%	33.70%	50.55%	67.41%	84.26%
University Savings Bank	301,881,570.73	228,612,951.12	13.20%	26.41%	39.61%	52.82%	66.02%
Bataan Development Bank	102,400,000.00	77,754,277.41	13.17%	26.34%	39.51%	52.68%	65.85%
Philippine Resources Savings Banking Corporation	1,655,999,037.20	1,280,833,710.22	12.93%	25.86%	38.79%	51.72%	64.65%
RCBC Savings Bank	8,915,418,143.00	7,182,065,835.47	12.41%	24.83%	37.24%	49.65%	62.07%
Planters Development Bank	5,015,541,380.46	4,476,918,961.89	11.20%	22.41%	33.61%	44.81%	56.02%
Business & Consumers Bank	83,632,670.01	79,778,218.98	10.48%	20.97%	31.45%	41.93%	52.42%
Farmers Savings & Loan Bank	108,830,885.36	120,105,189.66	9.06%	18.12%	27.18%	36.25%	45.31%
Security Bank Savings Corporation	1,832,207,546.10	2,117,832,548.04	8.65%	17.30%	25.95%	34.61%	43.26%
Malayan Bank Savings & Mortgage Bank	943,996,690.79	1,150,906,649.00	8.20%	16.40%	24.61%	32.81%	41.01%
Dumaguete City Development Bank	169,540,000.00	217,297,074.83	7.80%	15.60%	23.41%	31.21%	39.01%
Philippine Savings Bank	12,103,215,539.95	16,065,835,469.57	7.53%	15.07%	22.60%	30.13%	37.67%
The Palawan Bank Inc.	18,704,567.06	25,911,081.73	7.22%	14.44%	21.66%	28.88%	36.09%
Citibank Savings Inc.	2,732,079,124.20	3,917,361,113.08	6.97%	13.95%	20.92%	27.90%	34.87%
Equicom SB	318,414,084.49	526,478,368.74	6.05%	12.10%	18.14%	24.19%	30.24%
United Overseas Bank Philippines	867,269,011.62	1,444,345,423.54	6.00%	12.01%	18.01%	24.02%	30.02%
Philippine Postal Savings Bank	489,404,754.28	877,330,533.58	5.58%	11.16%	16.74%	22.31%	27.89%
Penbank, Inc.	146,700,941.96	285,232,586.90	5.14%	10.29%	15.43%	20.57%	25.72%
Opportunity Kauswagan Bank, Inc.	83,197,928.00	170,899,309.83	4.87%	9.74%	14.60%	19.47%	24.34%
BPI Family Savings Bank	7,144,944,313.26	15,860,798,666.60	4.50%	9.01%	13.51%	18.02%	22.52%
BPI Globe Banko Inc. Savings Bank	347,171,299.46	782,143,645.87	4.44%	8.88%	13.32%	17.75%	22.19%
First Consolidated Bank	809,084,393.84	1,970,817,172.11	4.11%	8.21%	12.32%	16.42%	20.53%
Bank One Savings and Trust Corp.	205,075,040.39	522,793,794.10	3.92%	7.85%	11.77%	15.69%	19.61%
Luzon Development Bank	192,710,117.71	492,360,638.92	3.91%	7.83%	11.74%	15.66%	19.57%
Sterling Bank of Asia Inc.	813,196,974.83	2,083,878,433.82	3.90%	7.80%	11.71%	15.61%	19.51%
Allied Savings Bank	398,214,763.48	1,029,058,182.69	3.87%	7.74%	11.61%	15.48%	19.35%
Pampanga Development Bank	46,551,826.06	126,267,718.61	3.69%	7.37%	11.06%	14.75%	18.43%
Tong Yang Savings Bank Inc.	221,895,055.32	627,270,962.27	3.54%	7.07%	10.61%	14.15%	17.69%
Sampaguita SLA	28,500,583.91	84,232,190.43	3.38%	6.77%	10.15%	13.53%	16.92%
UCPB Savings Bank	871,879,199.72	2,579,430,757.11	3.38%	6.76%	10.14%	13.52%	16.90%
Silangan Savings and Loan Bank, Inc.	16,384,090.99	51,238,430.87	3.20%	6.40%	9.59%	12.79%	15.99%
Cordillera Savings Bank	38,180,991.33	123,806,190.07	3.08%	6.17%	9.25%	12.34%	15.42%
Philippine Business Bank	1,184,818,220.39	3,852,281,882.85	3.08%	6.15%	9.23%	12.30%	15.38%
Metro Cebu Public Savings Bank	21,788,122.03	71,210,205.16	3.06%	6.12%	9.18%	12.24%	15.30%
Maritime SLA	18,463,195.45	69,271,831.58	2.67%	5.33%	8.00%	10.66%	13.33%
Hiyas Savings & Loan Bank	44,585,516.05	175,599,508.50	2.54%	5.08%	7.62%	10.16%	12.70%
Malasiqui Progressive SLB, Inc.	14,315,768.15	57,487,437.99	2.49%	4.98%	7.47%	9.96%	12.45%
Quezon Coconut Producers SLB Inc.	14,406,237.66	58,253,245.56	2.47%	4.95%	7.42%	9.89%	12.37%
BPI Direct Savings Bank	188,361,996.97	787,541,250.61	2.39%	4.78%	7.18%	9.57%	11.96%
Producers Savings Bank	242,913,468.11	1,045,373,505.87	2.32%	4.65%	6.97%	9.29%	11.62%
Lemery Savings & Loan Bank, Inc.	13,764,073.96	74,467,764.45	1.85%	3.70%	5.54%	7.39%	9.24%
Wealth Bank - A Development Bank	73,493,574.61	417,967,098.12	1.76%	3.52%	5.28%	7.03%	8.79%
World Partners Bank (A Thrift Bank)	29,262,890.43	182,889,092.93	1.60%	3.20%	4.80%	6.40%	8.00%
Tower Development Bank	16,820,545.00	115,765,899.34	1.45%	2.91%	4.36%	5.81%	7.26%
CityState Savings Bank	109,707,511.72	808,185,795.23	1.36%	2.71%	4.07%	5.43%	6.79%
City Savings Bank	233,835,797.02	1,947,420,462.29	1.20%	2.40%	3.60%	4.80%	6.00%
Dungganon Bank	7,410,175.55	62,935,596.15	1.18%	2.35%	3.53%	4.71%	5.89%
The Queen City Development Bank	75,766,048.80	678,792,264.05	1.12%	2.23%	3.35%	4.46%	5.58%
Pridestar Development Bank	7,066,828.55	74,627,626.02	0.95%	1.89%	2.84%	3.79%	4.73%
Century Savings Bank	79,152,574.58	873,232,215.08	0.91%	1.81%	2.72%	3.63%	4.53%
Pacific Ace Savings Bank	6,811,790.66	75,921,914.77	0.90%	1.79%	2.69%	3.59%	4.49%
HSBC Savings Bank (Phils) Inc.	225,365,387.78	2,861,807,423.16	0.79%	1.57%	2.36%	3.15%	3.94%
Sun Savings Bank	5,199,118.79	77,692,055.29	0.67%	1.34%	2.01%	2.68%	3.35%
Card SME Bank Inc. (A Thrift Bank)	11,586,934.61	201,058,032.28	0.58%	1.15%	1.73%	2.31%	2.88%
Isla Bank (A Thrift Bank) Inc.	34,550,874.58	631,893,880.25	0.55%	1.09%	1.64%	2.19%	2.73%
Northpoint Development Bank	4,600,700.26	93,901,080.98	0.49%	0.98%	1.47%	1.96%	2.45%
Progress SLA	3,571,915.60	83,990,340.37	0.43%	0.85%	1.28%	1.70%	2.13%
Microfinance Maximum SB (Maxbank)	1,676,405.54	61,231,684.17	0.27%	0.55%	0.82%	1.10%	1.37%
Optimum Development Bank	13,702,260.73	675,732,293.95	0.20%	0.41%	0.61%	0.81%	1.01%
Merchants Savings & Loan Association Inc.	795,000.00	640,602,537.64	0.01%	0.02%	0.04%	0.05%	0.06%
BDO Elite Savings Bank	0.00	1,507,557,562.16	0.00%	0.00%	0.00%	0.00%	0.00%
Enterprise Bank Inc.	0.00	203,469,413.04	0.00%	0.00%	0.00%	0.00%	0.00%
Bataan SLA	NA	0.00	NA	NA	NA	NA	NA
Grand Total	61,507,614,711.13	87,764,013,064.02	7.01%	14.02%	21.02%	28.03%	35.04%