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Monday, November 9, 2015

Overstated Capital of Philippine Banks as of March 31, 2015

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, nine banks have Deferred Charges as of March 31, 2015:

  1. United Coconut Planters Bank (Deferred Charges of 42.50% of SE)
  2. Planters Development Bank (Deferred Charges of 35.97% of SE)
  3. Bataan Development Bank (Deferred Charges of 14.31% of SE)
  4. City Savings Bank (Deferred Charges of 5.45% of SE)
  5. Bank of Commerce (Deferred Charges of 2.17% of SE)
  6. Card SME Bank, Inc. (Deferred Charges of 0.62% of SE)
  7. Wealth Development Bank Corporation (Deferred Charges of 0.46% of SE)
  8. Banco De Oro Unibank, Inc. (Deferred Charges of 0.03% of SE)
  9. Farmers Savings and Loan Bank (Deferred Charges of 0.01% of SE)

It must be noted that four of these banks were ranked as  distressed (highlighted in yellow) as of December 31, 2014:

  1. United Coconut Planters Bank (Distressed Ratio of 441.42%)
  2. Planters Development Bank  (Distressed Ratio of 191.46%)
  3. Bank of Commerce (Distressed Ratio of 184.58%)
  4. Bataan Development Bank (Distressed Ratio of 144.69%)

For more information on distressed banks, please see the previous blog post: "The Top Distressed Philippine Banks as of December 31, 2014.

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 March 31, 2015:

  1. United Coconut Planters Bank (Deferred Charges of 42.50% of SE)
  2. Planters Development Bank (Deferred Charges of 35.97% 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 March 31, 2015:

  1. City Savings Bank (Deferred Charges 7.37% of RE)
  2. Card SME Bank Inc (Deferred Charges 3.04% of RE)
  3. Wealth Development Bank Corporation (Deferred Charges 1.88% of RE)
  4. BDO Unibank (Deferred Charges of 0.07% of RE)
  5. Farmers Savings and Loan Bank, Inc. (Deferred Charges of 0.01% of RE)
For one bank with overstated capital, Deferred Charges will exceed their Retained Earnings:
  1. United Coconut Planters Bank (Deferred Charges of 133.32% of RE)

Two of the banks with  Deferred Charges have negative Retained Earnings.  As such, they do not have the capacity to absorb additional losses.
  1. Bank of Commerce (Retained Earnings of - Php 4.300 billion vs. Deferred Charges of Php 341.683 million.
  2. Planters Development Bank (Retained Earnings of - PhP 778.862 million vs. Deferred Charges of Php 1.341 billion

For more information of these Deferred Charges, please consult the previous blog posts: "Overstated Capital of Philippine Banks as of December 31, 2014""Overstated Capital of Philippine Banks as of June 30, 2014""Overstated Capital of Philippine Banks as of March 31, 2014""Overstated Capital of Philippine Banks as of December 31, 2013""Overstated Capital of Philippine Banks as of September 30, 2013""Can Philippine Banks Charge Their Unbooked Losses Against Retained Earnings? - June 30, 2013"Can Philippine Banks Charge their Unbooked Losses Against Retained Earnings? - March 31, 2013""Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - December 31, 2012" and "Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - December 31, 2012".


Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholder's Equity
In Php
March 31, 2015
















Bank Type of Bank Deferred Charges Unbooked Losses Total Deferred Charges Stockholder's Equity Adjusted SE Impact on SE
UNITED COCONUT PLANTERS BANK U/KB 8,284,746,199.58 0.00 8,284,746,199.58 19,493,624,037.54 11,208,877,837.96 42.50%
PLANTERS DEVELOPMENT BANK Thrift 1,341,386,981.98 0.00 1,341,386,981.98 3,729,311,188.88 2,387,924,206.90 35.97%
BATAAN DEVELOPMENT BANK Thrift 10,240,410.34 0.00 10,240,410.34 71,577,676.61 61,337,266.27 14.31%
CITY SAVINGS BANK Thrift 357,255,092.15 0.00 357,255,092.15 6,554,464,780.82 6,197,209,688.67 5.45%
BANK OF COMMERCE U/KB 341,683,392.90 0.00 341,683,392.90 15,776,044,047.26 15,434,360,654.36 2.17%
CARD SME BANK INC A THRIFT BANK Thrift 2,879,678.96 0.00 2,879,678.96 464,160,148.68 461,280,469.72 0.62%
WEALTH DEVELOPMENT BANK CORPORATION Thrift 1,929,202.52 0.00 1,929,202.52 419,331,125.73 417,401,923.21 0.46%
BDO UNIBANK INC U/KB 49,288,522.93 0.00 49,288,522.93 180,124,872,745.52 180,075,584,222.59 0.03%
FARMERS SAVINGS & LOAN BANK INC Thrift 5,724.13 0.00 5,724.13 109,971,561.50 109,965,837.37 0.01%
Grand Total
10,389,415,205.49 0.00 10,389,415,205.49 226,743,357,312.54 216,353,942,107.05 4.58%



Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In Php
March 31, 2015










Bank Total Deferred Charges RE Adjusted RE Impact on RE
UNITED COCONUT PLANTERS BANK 8,284,746,199.58 6,214,106,212.76 -2,070,639,986.82 133.32%
BATAAN DEVELOPMENT BANK 10,240,410.34 11,010,707.53 770,297.19 93.00%
CITY SAVINGS BANK 357,255,092.15 4,849,480,670.85 4,492,225,578.70 7.37%
CARD SME BANK INC A THRIFT BANK 2,879,678.96 94,831,513.84 91,951,834.88 3.04%
WEALTH DEVELOPMENT BANK CORPORATION 1,929,202.52 102,753,465.78 100,824,263.26 1.88%
BDO UNIBANK INC 49,288,522.93 69,075,712,138.22 69,026,423,615.29 0.07%
FARMERS SAVINGS & LOAN BANK INC 5,724.13 43,662,699.65 43,656,975.52 0.01%
BANK OF COMMERCE 341,683,392.90 -4,299,684,940.48 -4,641,368,333.38 -7.95%
PLANTERS DEVELOPMENT BANK 1,341,386,981.98 -778,861,623.78 -2,120,248,605.76 -172.22%
Grand Total 10,389,415,205.49 75,313,010,844.37 64,923,595,638.88 13.79%

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