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Saturday, October 5, 2013

Can Philippine Banks Charge their Unbooked Losses Against Retained Earnings? - March 31, 2013

Last July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged 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."

But can these banks do so? The answer is: yes but only for some banks.  As can be seen from the table below, only eleven banks have the Stockholders Equity (SE) to absorb these Deferred Charges:

  1. Planters Development Bank (Deferred Charges of 48.75% of SE)
  2. United Coconut Planters Bank (Deferred Charges of 48.30% of SE)
  3. World Partners Bank (Deferred Charges of 33.98% of SE)
  4. Bataan Development Bank (Deferred Charges of 27.50% of SE)
  5. Bank of Commerce (Deferred Charges of 4.70% of SE)
  6. Card SME Bank, Inc. (Deferred Charges of 2.46% of SE)
  7. City Savings Bank, Inc. (Deferred Charges of 1.64% of SE)
  8. Wealth Development Bank Corporation (Deferred Charges of 1.55% of SE)
  9. Security Bank Savings Corporation (0.12% of SE)
  10. Banco De Oro Unibank, Inc. (Deferred Charges of 0.11% of SE)
  11. Farmers Savings and Loan Bank (Deferred Charges of 0.03% of SE)
It must be noted that six of these banks are considered borderline insolvent (highlighted in yellow):

  1. United Coconut Planters Bank (Distressed Ratio of 529.04%)
  2. Planters Development Bank  (Distressed Ratio of 257.29%)
  3. Bataan Development Bank (Distressed Ratio of 213.99%)
  4. Bank of Commerce (Distressed Ratio of 173.39%)
  5. Farmers Savings and Loan Bank (Distressed Ratio of 169.98%)
  6. Security Bank Savings Corporation (Distressed Ratio of 110.40%)


 For more information on distressed banks, please see the previous blog post: "The Top Distressed Philippine Banks as of March 31, 2013.

For four of the banks, booking their Deferred Charges immediately will only serve to impair 25% or more of their Stockholders Equity:

  1. Planters Development Bank (Deferred Charges of 48.75% of SE)
  2. United Coconut Planters Bank (Deferred Charges of 48.30% of SE)
  3. World Partners Bank (Deferred Charges of 33.98% of SE)
  4. Bataan Development Bank (Deferred Charges of 27.50% of SE)
Naturally, these banks are considered distressed.

Retained Earnings

Only five banks have sufficient Retained Earnings (RE) to absorb their unbooked losses:
  1. Planters Development Bank (Deferred Charges of 83.74% of RE)
  2. Wealth Development Bank Corporation (Deferred Charges of 9.89% of RE)
  3. City Savings Bank, Inc. (Deferred Charges of 1.92% of RE)
  4. Banco De Oro Unibank (Deferred Charges of 0.47% of RE)
  5. Farmers Savings and Loan Bank, Inc. (Deferred Charges of 0.09% of RE)
For two of the banks, Deferred Charges will exceed their Retained Earnings:
  1. Bataan Development Bank (Deferred Charges of 334.68% of RE)
  2. United Coconut Planters Bank (Deferred Charges of 321.10% of RE)

Four of the banks with  Deferred Charges have negative Retained Earnings.  As such, they do not have the capacity to absorb additional losses.
  1. World Partners Bank (Retained Earnings of - Php 22.310 million vs. Deferred Charges of Php 53.331 million)
  2. Card SME Bank (Retained Earnings of - Php 18.725 million vs. Deferred Charges of Php 5.110 million)
  3. Bank of Commerce (Retained Earnings of - PhP 4.043 billion vs. Deferred Charges of PhP 0.903 billion)
  4. Security Bank Savings Corporation (Retained Earnings of - Php 914.300 million vs. Deferred Charges of Php 1.356 million) 
It should be noted that several banks highlighted in previous blog posts have entirely eliminated their unbooked losses or deferred charges in 2012. 

Deferred Charges eliminated in the 4th Qtr of 2012 are as follows:
  1. Philippine Bank of Communications (Deferred Charges of 45.99% of SE as of 3Q 2012)
  2. Rizal Commercial Banking Corporation (Deferred Charges of 3.82% of SE as 3Q 2012)
Deferred Charges eliminated in the 3rd Qtr of 2012 are as follows:
  1. Philippine National Bank (Deferred Charges of 23.65% of SE as of 2Q 2012)
  2. Land Bank of the Philippines (Deferred Charges of 4.78% of SE as of 2Q 2012)
  3. Philippine Veterans Bank (Deferred Charges of 1.02% of SE as 2Q 2012)
It is not clear why Banco De Oro Unibank, Inc., whose Deferred Charges amounted to only 0.14% of SE, has not followed suit.



Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholder's Equity
In Php
March 31, 2013










Bank Unbooked Losses SE Adjusted SE Impact on SE
Planters Development Bank 1,898,568,467.82 3,894,550,868.90 1,995,982,401.08 48.75%
United Coconut Planters Bank 9,841,900,553.53 21,725,109,221.46 11,883,208,667.93 45.30%
World Partners Bank 53,331,214.32 156,960,687.78 103,629,473.46 33.98%
Bataan Development Bank 17,487,365.73 63,580,789.69 46,093,423.96 27.50%
Bank of Commerce 902,587,565.94 19,197,827,867.71 18,295,240,301.77 4.70%
Card SME Bank, Inc. 5,110,330.07 207,351,272.15 202,240,942.08 2.46%
City Savings Bank, Inc. 40,477,588.53 2,472,118,775.49 2,431,641,186.96 1.64%
Wealth Development Bank Corporation 6,117,443.37 393,951,279.14 387,833,835.77 1.55%
Security Bank Savings Corporation 1,355,985.76 1,123,967,139.31 1,122,611,153.55 0.12%
Banco De Oro Unibank 197,154,091.09 173,866,230,648.58 173,669,076,557.49 0.11%
Farmers Savings and Loan Bank, Inc. 31,349.51 101,626,945.31 101,595,595.80 0.03%
Al-Amanah Islamic Bank of the Philippines 0.00 431,547,413.87 431,547,413.87 0.00%
Allied Savings Bank 0.00 997,482,772.75 997,482,772.75 0.00%
ANZ Banking Group Ltd 0.00 2,676,259,564.58 2,676,259,564.58 0.00%
Asia United Bank Corporation 0.00 11,906,072,196.42 11,906,072,196.42 0.00%
Bangkok Bank Public Co. Ltd 0.00 1,145,898,151.12 1,145,898,151.12 0.00%
Bank of America N.A. 0.00 596,946,705.20 596,946,705.20 0.00%
Bank of China Limited - Manila Branch 0.00 672,028,344.23 672,028,344.23 0.00%
Bank of the Philippine Islands 0.00 100,230,894,475.56 100,230,894,475.56 0.00%
Bank One Savings and Trust Corporation 0.00 530,389,484.18 530,389,484.18 0.00%
Bataan SLA 0.00 75,118,952.34 75,118,952.34 0.00%
BDO Elite Savings Bank, Inc. 0.00 1,587,605,708.24 1,587,605,708.24 0.00%
BDO Private Bank, Inc. 0.00 6,022,759,830.20 6,022,759,830.20 0.00%
BPI Direct Savings Bank, Inc. 0.00 803,918,092.43 803,918,092.43 0.00%
BPI Family Savings Bank, Inc. 0.00 17,306,461,368.33 17,306,461,368.33 0.00%
BPI Globe BanKO, Inc. 0.00 499,613,168.62 499,613,168.62 0.00%
Business and Consumers Bank 0.00 77,927,239.65 77,927,239.65 0.00%
Century Savings Banking Corporation 0.00 901,370,505.91 901,370,505.91 0.00%
China Bank Savings, Inc. 0.00 1,336,209,020.05 1,336,209,020.05 0.00%
China Banking Corporation 0.00 43,001,565,849.86 43,001,565,849.86 0.00%
Chinatrust (Philippines) Commercial Banking Corporation 0.00 6,473,083,695.37 6,473,083,695.37 0.00%
Citibank N.A. 0.00 7,664,105,443.06 7,664,105,443.06 0.00%
Citibank Savings, Inc. 0.00 1,472,870,648.62 1,472,870,648.62 0.00%
CityState Savings Bank Inc. 0.00 795,043,341.21 795,043,341.21 0.00%
Comsavings Bank 0.00 382,581,265.01 382,581,265.01 0.00%
Cordillera Savings Bank 0.00 97,373,694.03 97,373,694.03 0.00%
Deutsche Bank AG 0.00 2,247,713,611.93 2,247,713,611.93 0.00%
Development Bank of the Philippines 0.00 42,929,191,158.40 42,929,191,158.40 0.00%
Dumaguete City Development Bank 0.00 233,849,354.48 233,849,354.48 0.00%
Dungganon Bank 0.00 64,479,298.55 64,479,298.55 0.00%
East West Banking Corporation 0.00 17,858,284,000.87 17,858,284,000.87 0.00%
Enterprise Bank Inc. 0.00 195,255,759.76 195,255,759.76 0.00%
Equicom Savings Bank, Inc. 0.00 459,838,990.18 459,838,990.18 0.00%
First Consolidated Bank, Inc. 0.00 1,939,239,317.62 1,939,239,317.62 0.00%
Hiyas Banking Corporation 0.00 157,773,949.33 157,773,949.33 0.00%
HongKong & Shanghai Banking Corporation 0.00 4,781,045,440.48 4,781,045,440.48 0.00%
HSBC Savings Bank (Phils), Inc. 0.00 2,748,084,259.69 2,748,084,259.69 0.00%
Iloilo City Development Bank 0.00 70,911,147.62 70,911,147.62 0.00%
Internationale Nederlanden Groep BK 0.00 2,795,170,643.11 2,795,170,643.11 0.00%
Isla Bank 0.00 637,164,919.99 637,164,919.99 0.00%
JP Morgan Chase National Bank Association 0.00 2,421,333,323.53 2,421,333,323.53 0.00%
Korea Exchange Bank 0.00 543,771,939.45 543,771,939.45 0.00%
Land Bank of the Philippines 0.00 91,259,545,903.56 91,259,545,903.56 0.00%
Lemery Savings and Loan Bank, Inc. 0.00 66,176,078.88 66,176,078.88 0.00%
Life Savings Bank, Inc. 0.00 64,608,956.87 64,608,956.87 0.00%
Luzon Development Bank 0.00 434,085,634.37 434,085,634.37 0.00%
Malasiqui Progressive Savings and Loan Bank 0.00 52,663,015.28 52,663,015.28 0.00%
Malayan Bank Savings & Mortgage Bank 0.00 1,056,259,592.22 1,056,259,592.22 0.00%
Maritime Savings Bank Corporation 0.00 65,560,548.63 65,560,548.63 0.00%
Maybank Philippines Inc. 0.00 10,182,436,458.59 10,182,436,458.59 0.00%
Mega International Commercial Bank Company Limited 0.00 649,152,544.54 649,152,544.54 0.00%
Merchants Savings and Loan Association, Inc. 0.00 535,527,047.95 535,527,047.95 0.00%
Metro Cebu Public Savings Bank 0.00 70,198,484.65 70,198,484.65 0.00%
Metropolitan Bank & Trust Company 0.00 122,188,510,670.78 122,188,510,670.78 0.00%
Microfinance Maximum Savings Bank 0.00 66,733,990.88 66,733,990.88 0.00%
Mizuho Corporate Bank Ltd. - Manila Branch 0.00 1,272,915,083.49 1,272,915,083.49 0.00%
Northpoint Development Bank 0.00 72,537,441.93 72,537,441.93 0.00%
Opportunity Kauswagan Bank 0.00 61,323,344.55 61,323,344.55 0.00%
Optimum Development Bank, Inc. 0.00 728,125,103.12 728,125,103.12 0.00%
Pacific Ace Savings Bank, Inc. 0.00 74,386,714.64 74,386,714.64 0.00%
Pampanga Development Bank 0.00 112,503,628.25 112,503,628.25 0.00%
Penbank, Inc. 0.00 271,010,894.61 271,010,894.61 0.00%
Philippine Bank of Communications 0.00 7,109,040,036.29 7,109,040,036.29 0.00%
Philippine Business Bank 0.00 7,978,879,476.66 7,978,879,476.66 0.00%
Philippine National Bank 0.00 80,105,100,648.55 80,105,100,648.55 0.00%
Philippine Postal Savings Bank, Inc. 0.00 759,927,280.94 759,927,280.94 0.00%
Philippine Resources Savings Banking Corporation 0.00 1,370,795,921.72 1,370,795,921.72 0.00%
Philippine Savings Bank 0.00 17,631,397,452.60 17,631,397,452.60 0.00%
Philippine Trust Company 0.00 22,248,019,776.86 22,248,019,776.86 0.00%
Philippine Veterans Bank 0.00 9,096,313,444.16 9,096,313,444.16 0.00%
Pride Star Development Bank, Inc. 0.00 69,963,653.77 69,963,653.77 0.00%
Producers Savings Bank Corporation 0.00 1,087,630,484.52 1,087,630,484.52 0.00%
Progress Savings and Loan Bank, Inc. 0.00 83,299,483.73 83,299,483.73 0.00%
Queen City Development Bank 0.00 667,259,864.54 667,259,864.54 0.00%
Quezon Coconut Producers Savings and Loan Bank 0.00 58,040,408.94 58,040,408.94 0.00%
RCBC Savings Bank, Inc. 0.00 7,815,557,867.68 7,815,557,867.68 0.00%
Rizal Commercial Banking Corporation 0.00 47,643,616,278.44 47,643,616,278.44 0.00%
Robinsons Bank Corporation 0.00 6,151,937,855.15 6,151,937,855.15 0.00%
Sampaguita Savings Bank, Inc. 0.00 53,013,204.79 53,013,204.79 0.00%
Security Bank Corporation 0.00 38,065,480,632.77 38,065,480,632.77 0.00%
Silangan Savings and Loan Bank, Inc. 0.00 10,391,308.19 10,391,308.19 0.00%
Standard Chartered Bank 0.00 2,050,871,175.77 2,050,871,175.77 0.00%
Sterling Bank of Asia, Inc. 0.00 2,308,153,826.27 2,308,153,826.27 0.00%
Sun Savings Bank, Inc. 0.00 115,048,743.38 115,048,743.38 0.00%
The Bank of Tokyo - Mitsubishi UFJ Ltd 0.00 1,925,492,931.38 1,925,492,931.38 0.00%
The Palawan Bank 0.00 16,444,109.52 16,444,109.52 0.00%
Tong Yang Savings Bank, Inc. 0.00 392,789,225.10 392,789,225.10 0.00%
Tower Development Bank 0.00 114,617,272.75 114,617,272.75 0.00%
UCPB Savings Bank 0.00 2,412,138,206.81 2,412,138,206.81 0.00%
Union Bank of the Philippines 0.00 48,228,662,513.03 48,228,662,513.03 0.00%
United Overseas Bank Philippines 0.00 702,252,001.37 702,252,001.37 0.00%
University Savings Bank, Inc. 0.00 206,998,198.47 206,998,198.47 0.00%
Village Bank, Inc. 0.00 72,569,009.96 72,569,009.96 0.00%
Grand Total 12,964,121,955.67 1,046,807,472,973.25 1,033,843,351,017.58 1.24%



Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In Php
March 31, 2013










Bank Unbooked Losses RE Adjusted RE Impact on RE
Bataan Development Bank 17,487,365.73 5,225,140.21 -12,262,225.52 334.68%
United Coconut Planters Bank 9,841,900,553.53 5,819,224,869.67 -4,022,675,683.86 169.13%
Planters Development Bank 1,898,568,467.82 2,267,249,230.37 368,680,762.55 83.74%
Wealth Development Bank Corporation 6,117,443.37 61,870,345.42 55,752,902.05 9.89%
City Savings Bank, Inc. 40,477,588.53 2,106,371,414.79 2,065,893,826.26 1.92%
Banco De Oro Unibank 197,154,091.09 42,048,863,454.89 41,851,709,363.80 0.47%
Farmers Savings and Loan Bank, Inc. 31,349.51 34,240,853.13 34,209,503.62 0.09%
Security Bank Savings Corporation 1,355,985.76 -914,299,921.67 -915,655,907.43 -0.15%
Bank of Commerce 902,587,565.94 -4,043,397,510.06 -4,945,985,076.00 -22.32%
Card SME Bank, Inc. 5,110,330.07 -18,724,977.88 -23,835,307.95 -27.29%
World Partners Bank 53,331,214.32 -22,309,832.94 -75,641,047.26 -239.05%
Grand Total 12,964,121,955.67 47,344,313,065.93 34,380,191,110.26 311.10%
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