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Monday, January 27, 2014

Overstated Capital of Philippine Banks as of September 30, 2013

On 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, ten banks have Deferred Charges as of September 30, 2013:

  1. Planters Development Bank (Deferred Charges of 57.78% of SE)
  2. United Coconut Planters Bank (Deferred Charges of 47.44% of SE)
  3. Bataan Development Bank (Deferred Charges of 19.16% of SE)
  4. Citibank Savings Inc. (Deferred Charges of 5.64% of SE)
  5. Bank of Commerce (Deferred Charges of 4.91% of SE)
  6. City Savings Bank, Inc. (Deferred Charges of 2.16% of SE)
  7. Card SME Bank, Inc. (Deferred Charges of 1.74% of SE)
  8. Wealth Development Bank Corporation (Deferred Charges of 0.75% of SE)
  9. Banco De Oro Unibank, Inc. (Deferred Charges of 0.10% of SE)
  10. Farmers Savings and Loan Bank (Deferred Charges of 0.00% of SE)

It must be noted that five of these banks were ranked as  distressed (highlighted in yellow) as of June 30, 2013:

  1. United Coconut Planters Bank (Distressed Ratio of 508.63%)
  2. Planters Development Bank  (Distressed Ratio of 264.16%)
  3. Bataan Development Bank (Distressed Ratio of 219.19%)
  4. Bank of Commerce (Distressed Ratio of 171.27%)
  5. Farmers Savings and Loan Bank (Distressed Ratio of 169.26%)

For more information on distressed banks, please see the previous blog post: "The Top Distressed Philippine Banks as of June 30, 2013.

For two of the banks, the immediate booking their Deferred Charges will only serve to impair 25% or more of their Stockholders Equity as of September 30, 2013:
  1. Planters Development Bank (Deferred Charges of 57.78% of SE)
  2. United Coconut Planters Bank (Deferred Charges of 47.44% of SE)
Naturally, these banks are considered distressed.

Retained Earnings

Only five banks have sufficient Retained Earnings (RE) to absorb their unbooked losses as of September 30, 2013:
  1. Planters Development Bank (Deferred Charges of 92.38% of RE)
  2. Wealth Development Bank Corporation (Deferred Charges of 4.57% of RE)
  3. City Savings Bank, Inc. (Deferred Charges of 2.99% of RE)
  4. Banco De Oro Unibank (Deferred Charges of 0.46% of RE)
  5. Farmers Savings and Loan Bank, Inc. (Deferred Charges of 0.01% of RE)
For two of the banks, Deferred Charges will exceed their Retained Earnings:
  1. Bataan Development Bank (Deferred Charges of 247.28% of RE)
  2. United Coconut Planters Bank (Deferred Charges of 162.08% of RE)

Three of the banks with  Deferred Charges have negative Retained Earnings.  As such, they do not have the capacity to absorb additional losses.
  1. Card SME Bank (Retained Earnings of - Php 6.437 million vs. Deferred Charges of Php 4.130 million)
  2. Bank of Commerce (Retained Earnings of - PhP 4.298 million vs. Deferred Charges of Php 0.762 million)
  3. Citibank Savings Inc. (Retained Earnings of - Php 2.719 million vs. Deferred Charges of Php 88.743 million)



Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholder's Equity
In Php
September 30, 2013
















Bank Type of Bank Deferred Charges Unbooked Losses Total Deferred Charges SE Adjusted SE Impact on SE
PLANTERS DEVELOPMENT BANK Thrift 1,810,401,941.40 0.00 1,810,401,941.40 3,133,227,648.33 1,322,825,706.93 57.78%
UNITED COCONUT PLANTERS BANK U/KB 9,841,900,553.53 0.00 9,841,900,553.53 20,746,333,625.69 10,904,433,072.16 47.44%
BATAAN DEVELOPMENT BANK Thrift 12,622,898.42 0.00 12,622,898.42 65,886,982.35 53,264,083.93 19.16%
CITIBANK SAVINGS INC Thrift 88,743,565.53 0.00 88,743,565.53 1,574,388,139.34 1,485,644,573.81 5.64%
BANK OF COMMERCE U/KB 762,361,522.68 0.00 762,361,522.68 15,518,003,350.98 14,755,641,828.30 4.91%
CITY SAVINGS BANK INC Thrift 62,880,258.70 0.00 62,880,258.70 2,910,703,059.42 2,847,822,800.72 2.16%
CARD SME BANK INC A THRIFT BANK Thrift 4,130,188.63 0.00 4,130,188.63 237,063,154.84 232,932,966.21 1.74%
WEALTH DEVELOPMENT BANK CORPORATION Thrift 3,004,671.44 0.00 3,004,671.44 401,547,654.84 398,542,983.40 0.75%
BDO UNIBANK INC U/KB 160,187,699.05 0.00 160,187,699.05 161,661,538,506.02 161,501,350,806.97 0.10%
FARMERS SAVINGS & LOAN BANK INC Thrift 4,498.56 0.00 4,498.56 112,083,965.94 112,079,467.38 0.00%
Grand Total
12,746,237,797.94 0.00 12,746,237,797.94 206,360,776,087.75 193,614,538,289.81 6.18%



Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In Php
September 30, 2013










Bank Unbooked Losses RE Adjusted RE Impact on RE
BATAAN DEVELOPMENT BANK 12,622,898.42 5,104,745.18 -7,518,153.24 247.28%
UNITED COCONUT PLANTERS BANK 9,841,900,553.53 6,072,377,000.13 -3,769,523,553.40 162.08%
PLANTERS DEVELOPMENT BANK 1,810,401,941.40 1,959,724,386.02 149,322,444.62 92.38%
WEALTH DEVELOPMENT BANK CORPORATION 3,004,671.44 65,710,269.24 62,705,597.80 4.57%
CITY SAVINGS BANK INC 62,880,258.70 2,106,371,414.79 2,043,491,156.09 2.99%
BDO UNIBANK INC 160,187,699.05 34,474,604,358.92 34,314,416,659.87 0.46%
FARMERS SAVINGS & LOAN BANK INC 4,498.56 33196749.26 33,192,250.70 0.01%
CITIBANK SAVINGS INC 88,743,565.53 -2,719,271,287.77 -2,808,014,853.30 -3.26%
BANK OF COMMERCE 762,361,522.68 -4,297,945,777.88 -5,060,307,300.56 -17.74%
CARD SME BANK INC A THRIFT BANK 4,130,188.63 -6,436,878.43 -10,567,067.06 -64.16%
Grand Total 12,746,237,797.94 37,693,434,979.46 24,947,197,181.52 33.82%

Source: www.bsp.gov.ph
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