Philippine Banks Deteriorate Slightly in the 3rd Qtr. of 2017

Editor's Note: The Philippine Deposit Insurance Corporation (PDIC) advised consumers to wisely choose the banks where they will deposit their money. The trouble is, most depositors don't and can't read financial statements before they open a bank account. The regulators, whose job is to safeguard the public's money, have not done a good job recently.  In the past ten years, two commercial banks, twenty-one thrift banks, and a staggering 187 rural banks have collapsed, often quite suddenly and without warning. Regulators do have a problem bank list that they do not divulge to the public, for fear of sparking another bank run. So who can the public turn to, to advise them where to put their money? No one, except the banks themselves who will always promote their self-interests. This analysis is an attempt to fill in that knowledge gap, by screening out the weaker banks that seem ready to implode at any given moment.

Editor's Note: The ratio of Distressed Assets to Total Capital Cushion is a variant of the famous Texas Ratio, which was widely used by US financial regulators to predict bank failure during the US Savings and Loan Crisis in the 1980s and early 1990s. The basic premise is that a bank with Distressed Assets greater than its Capital Cushion is in danger of insolvency because a significant drop in the value of  the Distressed Assets will eat into a significant amount of the bank's capital.  For a more detailed discussion of this ratio, please visit a previous blog post: The Texas Ratio of Select Philippine Banks  

Based on the individual Published Statements of Condition for the Philippine Banking Industry (from www.bsp.gov.ph), Total Distressed Assets of Philippine Banks increased by Php 5.10 billion or 0.78% from June 30, 2017 to September 30, 2017.  This increase was partially offset by the increase of their Total Capital Cushion of Php 2.91 billion or 0.17% during the same period. As a result, the Ratio of Total Distressed Assets to Total Capital Cushion of Philippine Commercial Banks increased by a marginal 0.19%, from 38.67% as of June 30, 2017 to 38.85% as of September 30, 2017. On a year on year basis, the Distressed Asset Ratio has dropped 3.38 percentage points from 42.23% as of September 30, 2017 to just 38.85% as of September 30, 2017.

Those banks that posted significant improvements (25% or more) in this ratio include (Distressed banks are highlighted in yellow, failed banks are highlighted in red):

1. Bank of America N.A. (65.34% decrease)
2. ING Bank N.V. (64.24% decrease)
3. Deutsche Bank AG (63.60% decrease)
4. Business and Consumers Bank (42.55% decrease)

The banks that exhibited significant deterioration (25% or more) in this ratio include:

1. The Bank of Tokyo-Mitsubishi UFJ Ltd (207.37% increase)
2. KEB Hana - Manila Brank (164.46% increase)
3. Village Bank Inc (51.40% increase)
4. Malasiqui Progressive Savings & Loan Bank (44.40% increase)
5. Lemery Savings & Loan Bank, Inc. (44.19% increase)
6. Security Bank Corporation (37.46% increase)
7. Robinsons Bank Corporation (30.24% increase)
8. PNB Savings Bank (26.59% increase)
9. United Coconut Planters Bank (26.57% increase)

Distressed Banks

The list of Philippine Banks classified as distressed as of September 30, 2017 are as follows:

1. Bank of China Limited - Manila Branch (Distressed Ratio of 513.85%)
2.  United Coconut Planters Bank (Distressed Ratio of 395.48%)
3. Inter-Asia Development Bank (Distressed Ratio of 387.97%)
4. Village Bank Inc (Distressed Ratio of 276.06%)
5. Philippine Postal Savings Bank Inc (Distressed Ratio of 234.61%)
6. Philippine Resources Savings Banking Corporation (Distressed Ratio of 171.47%)
7.  Malayan Bank Savings and Mortgage Bank Inc (Distressed Ratio of 168.30%)
8. Luzon Development Bank (Distressed Ratio of 159.96%)
9. Yuanta Savings Bank Philippines (Distressed Ratio of 138.72%)
10. China Bank Savings Inc (Distressed Ratio of 126.64%)
11. World Partners Bank (Distressed Ratio of 124.67%)
12. Enterprise Bank Inc (Distressed Ratio of 123.75%)
13. Bataan Development Bank (Distressed Ratio of 107.33%)
14. Equicom Savings Bank (Distressed Ratio of 106.57%)

As a group, the distressed banks showed a significant increase in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 247.78% as of September 30, 2017, up from 204.52% as of June 30, 2017.  

Arrivals

1. Equicom Savings Bank entered the Distressed Banks list with a Distressed Ratio of 106.57% as of September 30, 2017 from a Distressed Ratio of just 99.37% as of June 30, 2017.

Departures

1. Philippine Veterans Bank left the Distressed Banks list with a Distressed Ratio of 96.33% as of September 30, 2017 from a Distressed Ratio of 101.56% as of June 30, 2017.
2. Deutsche Bank AG left the Distressed Banks list with a Distressed Ratio of 36.68% as of September 30, 2017 from a Distressed Ratio of 100.78% as of June 30, 2017.

 

Philippine Banking System
Total Distressed Assets/ Total Capital Cushion
June 30, 2017 to September 30, 2017
In %
Bank	September 30, 2017	June 30, 2017	Variance	% Variance
THE BNK OF TOKYO-MITSUBISHI UFJ LTD	8.76%	2.85%	5.91%	207.37%
KEB HANA BANK - MANILA BRANCH	27.57%	10.43%	17.15%	164.46%
VILLAGE BANK INC (A THRIFT BANK)	276.06%	182.34%	93.72%	51.40%
MALASIQUI PROGRESSIVE SLB, INC	32.42%	22.45%	9.97%	44.40%
LEMERY SAVINGS & LOAN BANK, INC.	22.15%	15.36%	6.79%	44.19%
SECURITY BANK CORP	19.13%	13.92%	5.21%	37.46%
ROBINSONS BANK CORPORATION	83.97%	64.47%	19.50%	30.24%
PNB SAVINGS BANK	20.69%	16.34%	4.34%	26.59%
UNITED COCONUT PLANTERS BANK	395.48%	312.46%	83.02%	26.57%
INDUSTRIAL BANK OF KOREA MANILA BRANCH	0.56%	0.46%	0.10%	21.95%
FARMERS SAVINGS & LOAN BANK INC	35.52%	29.39%	6.13%	20.84%
CTBC BANK (PHILIPPINES) CORP	23.06%	19.15%	3.91%	20.44%
ISLA BANK(A THRIFT BANK) INC	4.59%	3.88%	0.71%	18.27%
BATAAN SAVINGS AND LOAN BANK	4.06%	3.47%	0.59%	16.95%
PHIL NATIONAL BANK	60.85%	54.71%	6.14%	11.22%
MARITIME SAVINGS BANK CORPORATION	86.34%	78.00%	8.33%	10.68%
PACIFIC ACE SAVINGS BANK INC	14.58%	13.34%	1.24%	9.27%
SUN SAVINGS BANK INC	27.71%	25.40%	2.30%	9.06%
MAYBANK PHILIPPINES INCORPORATED	78.78%	72.52%	6.26%	8.64%
SHINHAN BANK - MANILA BRANCH	1.47%	1.35%	0.11%	8.51%
LEGAZPI SAVINGS BANK INC	98.08%	90.51%	7.57%	8.36%
MERCHANTS SAVINGS & LOAN ASSN INC	7.30%	6.77%	0.53%	7.84%
RIZAL COMM'L BANKING CORP	27.65%	25.64%	2.01%	7.82%
EQUICOM SAVINGS BANK INC	106.57%	99.37%	7.20%	7.25%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT BANK)	57.70%	53.82%	3.87%	7.20%
CATHAY UNITED BANK CO LTD - MANILA BRANCH	0.51%	0.48%	0.03%	6.98%
ALLBANK (A THRIFT BANK) INC	29.67%	27.77%	1.90%	6.86%
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	0.33%	0.31%	0.02%	6.74%
1ST VALLEY BANK INC A DEVELOPMENT BANK	39.04%	36.70%	2.33%	6.36%
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	68.19%	64.40%	3.78%	5.88%
FIRST CONSOLIDATED BANK INC (A PDB)	32.10%	30.35%	1.74%	5.75%
BDO UNIBANK INC	26.15%	24.83%	1.32%	5.32%
DUMAGUETE CITY DEV BANK INC	56.65%	53.84%	2.81%	5.21%
PHIL SAVINGS BANK	79.81%	75.88%	3.93%	5.17%
MALAYAN BANK SAVINGS AND MORT BANK INC	168.30%	160.21%	8.09%	5.05%
YUANTA SAVINGS BANK PHILIPPINES INC	138.72%	132.58%	6.14%	4.63%
CHINA BANKING CORP	25.15%	24.24%	0.92%	3.79%
CORDILLERA SAVINGS BANK INC	44.09%	42.58%	1.51%	3.54%
NORTHPOINT DEV'T BANK INC	45.19%	43.65%	1.53%	3.51%
CHINA BANK SAVINGS INC	126.64%	122.82%	3.82%	3.11%
CARD SME BANK INC A THRIFT BANK	30.62%	29.74%	0.89%	2.98%
HIYAS BANKING CORPORATION	37.16%	36.22%	0.94%	2.60%
UNIVERSITY SAVINGS BANK INC	34.97%	34.18%	0.79%	2.31%
MEGA INT'L COMM'L BANK CO LTD	1.29%	1.27%	0.02%	1.92%
PHIL STAR DEVELOPMENT BANK INC	26.95%	26.55%	0.40%	1.51%
BPI FAMILY SAVINGS BANK INC	48.34%	47.66%	0.68%	1.43%
BANK OF CHINA LIMITED-MANILA BRANCH	513.85%	506.89%	6.95%	1.37%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	6.32%	6.25%	0.07%	1.16%
PHIL TRUST COMPANY	39.64%	39.32%	0.32%	0.81%
STANDARD CHARTERED BANK	54.65%	54.41%	0.24%	0.44%
RCBC SAVINGS BANK INC	72.57%	72.52%	0.04%	0.06%
PHIL POSTAL SAVINGS BANK INC	234.61%	234.61%	0.00%	0.00%
PRODUCERS SAVINGS BANK CORPORATION	52.61%	52.61%	0.00%	0.00%
THE PALAWAN BANK (PALAWAN DB) INC	68.93%	68.93%	0.00%	0.00%
WORLD PARTNERS BANK (A THRIFT BANK)	124.67%	124.67%	0.00%	0.00%
LAND BANK OF THE PHILIPPINES	34.32%	34.36%	-0.05%	-0.13%
BANGKOK BANK PUBLIC CO LTD	4.00%	4.05%	-0.05%	-1.19%
CITIBANK, N.A.	51.24%	52.00%	-0.76%	-1.46%
BANK OF MAKATI (A SAVINGS BANK) INC	51.01%	51.83%	-0.82%	-1.58%
INTER-ASIA DEVELOPMENT BANK	387.97%	394.27%	-6.30%	-1.60%
BANK ONE SAVINGS AND TRUST CORP.	44.09%	44.85%	-0.76%	-1.69%
WEALTH DEVELOPMENT BANK CORPORATION	37.62%	38.29%	-0.67%	-1.75%
EAST WEST BANKING CORP	70.47%	71.78%	-1.31%	-1.82%
STERLING BANK OF ASIA INC (A SAVINGS BANK)	50.83%	51.93%	-1.10%	-2.12%
CENTURY SAVINGS BANK CORPORATION	16.00%	16.36%	-0.36%	-2.17%
BATAAN DEVELOPMENT BANK	107.33%	110.43%	-3.11%	-2.81%
HSBC SAVINGS BANK(PHILS) INC	9.81%	10.11%	-0.30%	-2.96%
BANK OF THE PHIL ISLANDS	25.08%	25.86%	-0.78%	-3.02%
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	38.12%	39.35%	-1.23%	-3.13%
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS BANK)	171.47%	177.06%	-5.58%	-3.15%
UNION BANK OF THE PHILS	56.68%	58.86%	-2.19%	-3.71%
FIRST COMMERCIAL BANK LTD MANILA BRANCH	0.48%	0.50%	-0.02%	-3.94%
LUZON DEVELOPMENT BANK	159.96%	167.83%	-7.87%	-4.69%
UCPB SAVINGS BANK	76.06%	79.86%	-3.80%	-4.75%
PHILIPPINE VETERANS BANK	96.33%	101.56%	-5.22%	-5.14%
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	0.68%	0.72%	-0.04%	-5.32%
LIFE SAVINGS BANK INC	23.54%	24.95%	-1.40%	-5.62%
BPI DIRECT BANKO INC A SAVINGS BANK	40.90%	43.35%	-2.44%	-5.63%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	34.48%	36.94%	-2.46%	-6.66%
QUEZON COCONUT BANK INC (A THRIFT BANK)	21.61%	23.23%	-1.61%	-6.95%
DEVELOPMENT BANK OF THE PHIL	40.28%	43.52%	-3.23%	-7.43%
ASIA UNITED BANK CORPORATION	36.18%	39.19%	-3.02%	-7.70%
METRO CEBU PUBLIC SAVINGS BANK	14.78%	16.01%	-1.24%	-7.73%
BANK OF COMMERCE	66.65%	72.61%	-5.96%	-8.21%
PAMPANGA DEVELOPMENT BANK	33.99%	37.31%	-3.32%	-8.89%
PHIL BANK OF COMMUNICATIONS	63.96%	71.09%	-7.13%	-10.03%
CITYSTATE SAVINGS BANK INC	46.65%	52.40%	-5.75%	-10.98%
CITY SAVINGS BANK INC	46.40%	53.80%	-7.40%	-13.75%
ENTERPRISE BANK INC (A THRIFT BANK)	123.75%	144.09%	-20.34%	-14.12%
HONGKONG & SHANGHAI BANKING CORP	23.29%	27.18%	-3.89%	-14.30%
METROPOLITAN BANK & TCO	27.06%	31.60%	-4.55%	-14.39%
MIZUHO BANK LTD - MANILA BRANCH	2.62%	3.07%	-0.45%	-14.78%
ANZ BANKING GROUP LTD	23.74%	28.66%	-4.92%	-17.16%
JP MORGAN CHASE BANK NATIONAL ASSN.	15.45%	19.92%	-4.47%	-22.42%
BDO PRIVATE BANK, INC.	36.95%	49.01%	-12.06%	-24.60%
BUSINESS AND CONSUMERS BANK (A DB)	12.13%	21.11%	-8.98%	-42.55%
DEUTSCHE BANK AG	36.68%	100.78%	-64.10%	-63.60%
ING BANK N.V.	9.74%	27.24%	-17.50%	-64.24%
BANK OF AMERICA N.A.	0.46%	1.33%	-0.87%	-65.34%
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.47%	NA	NA	NA
Grand Total	38.85%	38.67%	0.19%	0.48%

Source: www.bsp.gov.ph

Disclaimer:

This list only serves as a screening guide.  It is not a definitive guide and must be taken in the context of other factors.  The figures are based on the individual banks' statement of condition as of June 30, 2017 and September 30, 2017 as published in the BSP website (www.bsp.gov.ph). For this analysis, no attempt was made to go through the audited financial statements of each bank. Readers are suggested to make their own investigations and verify the figures presented. Both BSP and PDIC have their own problem bank screening systems that are much more sophisticated in scope and design, given that they have more access to information over the banks they regulate.