Philippine Commercial Banks Show Improvement at Year End 2011

Editor's Note:  This blog was inspired by the spectacular failure of Banco Filipino Savings and Mortgage Bank for the second time in its 38 years of existence.  This blog post and other blog posts like it attempt to describe why the bank failed.  But it also attempts to assess what other Philippine Banks have the potential to fail in the not too distant future. To see blog posts on other banks, click on the Banco Filipino Graphic at the top of the blog or click on the blog archive on the right hand column, or simply go to bancofilipinofailure.blogspot.com.

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:  http://www.gmanetwork.com/news/video/93600/saksi-pagsasara-ng-banco-filipino-at-lbc-devt-bank-ikinadismaya.  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 Commercial Banking Industry (from www.bsp.gov.ph), Total Distressed Assets of Philippine Thrift Banks decreased by PHP 8.1 billion or 1.46% from September 30, 2011 to December 31, 2011.  Total Capital Cushion of Philippine Commercial Banks increased by 3.65% during the same period.  As a result, the Commercial Bank's Ratio of Total Distressed Assets to Total Capital Cushion decreased by 4.93%, from 83.19% as of September 30, 2011 to 79.09% as of December 31, 2011.  The results are skewed slightly lower by the absence of Export and Industry Bank, which, as of September 30, 2011, was ranked the most insolvent bank.  See previous blog posts: "Export and Industry Bank Becomes Even More Insolvent! - September 30, 2011" and "Time is Running Out for Export and Industry Bank".  Export and Industry Bank did not have a Published Statement of Condition on www.bsp.gov.ph as of the date of this blog post.

Those banks that posted significant improvements in this ratio include:

1. Internationale Nederlanden Groep BK (36.28% decrease)
2. BDO Private Bank, Inc. (29.85% decrease)
3. Maybank Philippines Inc. (25.23% decrease)
4. HongKong and Shanghai Banking Corporation (22.82% decrease)
5. Union Bank of the Philippines (15.31% decrease)

The banks that exhibited significant deterioration in this ratio include:

1. Asia United Bank Corporation (32.21% increase)
2. East West Banking Corporation (27.38% increase)

Distressed Banks

None of the banks with significant increases have been classified as distressed based on their ratio of Total Distressed Assets to Total Capital Cushion as of the 4th Qtr. 2011.

United Coconut Planters Bank continues to rank as the most distressed commercial bank in the country.  Its Total Distressed Assets are more than ten times in Total Capital Cushion, Three of the banks ranked as distressed in the 4th Qtr. of 2011 showed a deterioration in their distressed ratios.  These are:

1. United Coconut Planters Bank (6.30% increase)
2. Philippine Bank of Communications (5.18% increase)
3. Philippine Veterans Bank (3.13% increase)

Two of the banks classified as distressed in the 4th Qtr. of 2011 showed a decline in their distressed ratios.  These are:

1. Philippine National Bank (13.50% decrease)
2. Bank of Commerce (8.92% decrease)

A third, Union Bank of the Philippines, which was classified as just barely distressed in the 3rd Qtr. of 2011 (with a distressed ratio of 100.73%), dropped out of the distressed list with a ratio of 85.31% in the 4th Qtr. of 2011.

All the banks that were flagged as borderline insolvent (highlighted in yellow) as of September 30, 2011, with the exception of the Union Bank of the Philippines, remain borderline insolvent as of December 31, 2011.  However, as a group the distressed banks showed some improvement in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 218.34% as of December 31, 2011, down from 236.86% as of September 30, 2011.

Philippine Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
September 30, 2011 to December 31, 2011
In PHP
Name of Bank	September 30, 2011	December 31, 2011	Variance	% Variance
Asia United Bank Corporation	47.00%	62.14%	15.14%	32.21%
East West Banking Corporation	53.66%	68.36%	14.69%	27.38%
Chinatrust (Philippines) Commercial Banking Corporation	16.63%	18.43%	1.81%	10.88%
Development Bank of the Philippines	46.15%	49.44%	3.29%	7.14%
United Coconut Planters Bank	944.09%	1003.58%	59.49%	6.30%
Philippine Bank of Communications	152.23%	160.10%	7.88%	5.18%
Bank of the Philippine Islands	61.77%	63.71%	1.94%	3.15%
Philippine Veterans Bank	189.62%	195.56%	5.94%	3.13%
Robinsons Bank Corporation	22.45%	22.46%	0.01%	0.05%
Philippine Trust Company	55.66%	55.45%	-0.21%	-0.38%
Al-Amanah Islamic Bank of the Philippines	15.69%	15.47%	-0.22%	-1.41%
Security Bank Corporation	48.03%	47.14%	-0.89%	-1.86%
China Banking Corporation	58.51%	57.42%	-1.09%	-1.87%
Banco De Oro Unibank	61.04%	59.90%	-1.14%	-1.87%
Allied Banking Corporation	72.98%	71.45%	-1.53%	-2.10%
Bank of Commerce	178.08%	162.20%	-15.88%	-8.92%
Land Bank of the Philippines	72.55%	65.30%	-7.25%	-9.99%
Metropolitan Bank & Trust Company	71.43%	62.99%	-8.44%	-11.81%
Rizal Commercial Banking Corporation	74.01%	64.70%	-9.31%	-12.58%
Philippine National Bank	170.82%	147.76%	-23.06%	-13.50%
Union Bank of the Philippines	100.73%	85.31%	-15.42%	-15.31%
HongKong & Shanghai Banking Corporation	92.97%	71.76%	-21.21%	-22.82%
Maybank Philippines Inc.	69.08%	51.65%	-17.43%	-25.23%
BDO Private Bank, Inc.	3.55%	2.49%	-1.06%	-29.85%
Internationale Nederlanden Groep BK	17.81%	11.35%	-6.46%	-36.28%
Grand Total	83.19%	79.09%	-4.10%	-4.93%

Philippine Commercial Banking System
Total Distressed Assets/ Total Capital Cushion
September 30, 2011 to December 31, 2011
In PHP
		September 30, 2011				December 31, 2011				Variance
Bank	Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP)	Total Capital Cushion (In PHP)	Distressed Assets/ Total Capital Cushion (In %)
United Coconut Planters Bank	58,433,954,233.82	6,189,438,043.36	944.09%		58,210,111,052.92	5,800,229,638.98	1003.58%		-223,843,180.90	-389,208,404.38	59.49%
Philippine Veterans Bank	10,879,880,413.60	5,737,758,181.67	189.62%		11,261,881,811.07	5,758,728,657.92	195.56%		382,001,397.47	20,970,476.25	5.94%
Bank of Commerce	32,699,114,872.49	18,361,861,626.49	178.08%		32,929,553,535.88	20,301,508,621.47	162.20%		230,438,663.39	1,939,646,994.98	-15.88%
Philippine Bank of Communications	9,291,519,325.92	6,103,760,074.12	152.23%		9,471,188,959.63	5,915,638,902.18	160.10%		179,669,633.71	-188,121,171.94	7.88%
Philippine National Bank	64,949,186,122.23	38,021,318,336.45	170.82%		61,539,362,228.07	41,647,300,624.97	147.76%		-3,409,823,894.16	3,625,982,288.52	-23.06%
Union Bank of the Philippines	38,582,465,913.28	38,301,194,129.33	100.73%		38,822,563,049.10	45,506,545,040.66	85.31%		240,097,135.82	7,205,350,911.33	-15.42%
HongKong & Shanghai Banking Corporation	5,182,943,886.09	5,574,647,606.25	92.97%		3,990,058,443.49	5,560,159,799.26	71.76%		-1,192,885,442.60	-14,487,806.99	-21.21%
Allied Banking Corporation	13,724,401,446.84	18,805,704,450.28	72.98%		13,475,330,400.74	18,859,833,076.12	71.45%		-249,071,046.10	54,128,625.84	-1.53%
East West Banking Corporation	6,350,758,139.69	11,834,102,039.71	53.66%		7,972,097,612.88	11,662,142,632.92	68.36%		1,621,339,473.19	-171,959,406.79	14.69%
Land Bank of the Philippines	36,986,132,132.78	50,983,030,868.93	72.55%		33,266,907,399.89	50,944,842,479.97	65.30%		-3,719,224,732.89	-38,188,388.96	-7.25%
Rizal Commercial Banking Corporation	27,086,579,563.52	36,598,227,573.49	74.01%		24,131,710,175.80	37,298,479,029.45	64.70%		-2,954,869,387.72	700,251,455.96	-9.31%
Bank of the Philippine Islands	50,690,573,945.83	82,069,124,131.12	61.77%		50,047,779,686.11	78,556,544,290.98	63.71%		-642,794,259.72	-3,512,579,840.14	1.94%
Metropolitan Bank & Trust Company	63,938,649,304.53	89,510,341,778.10	71.43%		63,787,741,208.04	101,261,532,842.48	62.99%		-150,908,096.49	11,751,191,064.38	-8.44%
Asia United Bank Corporation	4,493,923,413.49	9,561,720,005.85	47.00%		5,941,452,139.74	9,561,736,538.00	62.14%		1,447,528,726.25	16,532.15	15.14%
Banco De Oro Unibank	67,521,482,859.14	110,621,563,730.79	61.04%		65,154,415,706.61	108,776,275,232.51	59.90%		-2,367,067,152.53	-1,845,288,498.28	-1.14%
China Banking Corporation	21,369,318,244.66	36,522,588,097.69	58.51%		23,774,532,770.51	41,406,720,599.32	57.42%		2,405,214,525.85	4,884,132,501.63	-1.09%
Philippine Trust Company	8,185,195,998.45	14,706,678,620.05	55.66%		8,112,568,190.46	14,631,348,671.35	55.45%		-72,627,807.99	-75,329,948.70	-0.21%
Maybank Philippines Inc.	2,736,360,904.56	3,961,339,978.25	69.08%		2,847,143,306.74	5,512,890,428.32	51.65%		110,782,402.18	1,551,550,450.07	-17.43%
Development Bank of the Philippines	16,528,998,918.41	35,817,588,465.99	46.15%		17,694,996,122.18	35,788,905,692.76	49.44%		1,165,997,203.77	-28,682,773.23	3.29%
Security Bank Corporation	12,831,498,874.37	26,715,472,886.65	48.03%		12,289,009,897.96	26,070,438,913.08	47.14%		-542,488,976.41	-645,033,973.57	-0.89%
Robinsons Bank Corporation	1,164,334,016.52	5,186,142,534.87	22.45%		1,173,989,648.85	5,226,473,730.40	22.46%		9,655,632.33	40,331,195.53	0.01%
Chinatrust (Philippines) Commercial Banking Corporation	1,082,554,081.24	6,511,597,089.04	16.63%		1,112,691,065.96	6,036,104,571.35	18.43%		30,136,984.72	-475,492,517.69	1.81%
Al-Amanah Islamic Bank of the Philippines	83,467,825.43	532,017,355.74	15.69%		82,421,466.30	532,866,747.85	15.47%		-1,046,359.13	849,392.11	-0.22%
Internationale Nederlanden Groep BK	971,653,400.08	5,454,949,434.17	17.81%		623,286,587.93	5,491,404,385.19	11.35%		-348,366,812.15	36,454,951.02	-6.46%
BDO Private Bank, Inc.	161,347,789.04	4,538,697,736.16	3.55%		113,090,563.50	4,534,582,971.11	2.49%		-48,257,225.54	-4,114,765.05	-1.06%
Grand Total	555,926,295,626.01	668,220,864,774.55	83.19%		547,825,883,030.36	692,643,234,118.60	79.09%		-8,100,412,595.65	24,422,369,344.05	-4.10%

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 September 30, 2011 and December 31, 2011 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.

Philippine Thrift Banks with Overstated Capital

In a previous post "BSP's Ampaw Accounting System", we detailed how quite a few banks had overstated capital as a result of BSP's policy of granting "regulatory relief" and allowed the deferment and amortization of unbooked losses arising from:

1. SPV Transactions;
2. Acquisitions of failed/failing banks;
3. Large credit losses

The premise behind this policy is regulatory forbearance that would allow the banks to earn back and write off those losses over time, reducing their need to raise additional capital and avoid  significant dilution of existing shareholders.

In other cases, such as in Asiatrust, banks were literally too weak to write down some additional charges and refused to take the losses.

These measures are not considered "kosher" under Philippine Financial Reporting Standards, resulting in qualified auditors opinions for the bulk of these banks accompanied by the auditor's own estimate on the impact of these unbooked losses on bank capital and assets.

However, the auditor's opinion is issued only once a year, making it difficult for the general public to gauge the financial health of a particular bank in between audited financial statements.  Fortunately, these banks are required to report these unbooked losses in their quarterly Published Statement of Condition as "Deferred Charges Not Yet Written Down," giving the public a way to track these unbooked losses on a quarterly basis. (See www.bsp.gov.ph).

In yesterday's blog post, entitled "Philippine Commercial Banks with Overstated Capital", we highlighted the impact of these unbooked losses on the capital of Philippine Commercial Banks.  Today, we do the same for Philippine Thrift Banks.

Based on their Published Statements of Condition as of September 30, 2011, a total of nine Philippine Thrift Banks, out of a total field of sixty-five thrift banks, have overstated capital.  The overstatement is not as severe as those of the Philippine Commercial Banks, wherein at least two banks - namely Philippine Bank of Communications (PBCom) and United Coconut Planters Bank (UCPB) - would experience a total or near wipeout of their capital base.  The top three thrift banks on this list would experience only a 15.03% to 16.45% writedown of their stockholders equity.  These banks are:

1. Bataan Development Bank

1. Citibank Savings Bank

1. Planters Development Bank

The rest of the six thrift banks with overstated capital have unbooked losses that would impact less than 8% of their stockholders equity.  It is interesting to note that six of the nine banks on this list have been classified as distressed (highlighted in yellow) in a previous blog post "Thrift Banks Improve Due to Survivorship Bias" based on their ratio of Total Distressed Assets to Total Capital Cushion.

Philippine Thrift Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholders Equity
In PHP
September 30, 2011
Bank	Unbooked Losses	SE	Adjusted SE	Impact on SE
Bataan Development Bank	11,166,806.10	67,898,427.98	56,731,621.88	16.45%
Citibank Savings Inc.	282,041,199.88	1,779,432,800.72	1,497,391,600.84	15.85%
Planters Development Bank	706,439,476.77	4,699,048,148.39	3,992,608,671.62	15.03%
Metro Cebu Public Savings Bank	3,712,112.61	47,862,077.33	44,149,964.72	7.76%
Wealth Bank (A Development Bank)	12,320,105.90	350,541,914.67	338,221,808.77	3.51%
The Queen City Development Bank	17,022,634.84	685,600,185.63	668,577,550.79	2.48%
Dungganon Bank	708,972.60	59,995,203.59	59,286,230.99	1.18%
Farmers Savings & Loan Bank Inc.	332,049.10	94,563,391.59	94,231,342.49	0.35%
Premiere Development Bank	1,677,265.99	768,276,843.83	766,599,577.84	0.22%
Allied Savings Bank	0.00	968,554,794.81	968,554,794.81	0.00%
Bank One Savings and Trust Corporation	0.00	511,804,029.18	511,804,029.18	0.00%
Bataan SLA	0.00	75,403,679.17	75,403,679.17	0.00%
BDO Elite Savings Bank Inc.	0.00	1,497,352,922.60	1,497,352,922.60	0.00%
BPI Direct Savings Bank	0.00	696,788,887.77	696,788,887.77	0.00%
BPI Family Savings Bank	0.00	13,215,459,607.20	13,215,459,607.20	0.00%
BPI Globe Banko Inc. Savings Bank	0.00	489,761,849.54	489,761,849.54	0.00%
Business & Consumers Bank (A Development Bank)	0.00	75,576,087.80	75,576,087.80	0.00%
Card SME Bank Inc. (A Thrift Bank)	0.00	133,830,679.61	133,830,679.61	0.00%
Century Savings Bank	0.00	863,184,238.96	863,184,238.96	0.00%
China Bank Savings	0.00	1,224,675,478.65	1,224,675,478.65	0.00%
City Savings Bank	0.00	1,609,624,035.57	1,609,624,035.57	0.00%
Citystate Savings Bank	0.00	780,126,791.84	780,126,791.84	0.00%
Cordillera Savings Bank	0.00	93,886,591.83	93,886,591.83	0.00%
Dumaguete City Development Bank	0.00	198,626,212.37	198,626,212.37	0.00%
EIB Savings Bank	0.00	71,672,922.39	71,672,922.39	0.00%
Equicom SB	0.00	413,669,902.29	413,669,902.29	0.00%
First Consolidated Bank Inc.	0.00	1,514,731,131.38	1,514,731,131.38	0.00%
GSIS Family Bank (A Thrift Bank)	0.00	448,823,253.98	448,823,253.98	0.00%
Hiyas Savings & Loan Bank	0.00	145,019,077.71	145,019,077.71	0.00%
HSBC Savings Bank	0.00	2,409,524,105.69	2,409,524,105.69	0.00%
Iloilo City Development Bank	0.00	59,936,963.98	59,936,963.98	0.00%
Isla Bank (A Thrift Bank) Inc.	0.00	626,953,633.38	626,953,633.38	0.00%
Lemery Savings & Loan Bank, Inc.	0.00	69,264,950.06	69,264,950.06	0.00%
Liberty Savings Bank	0.00	59,477,296.86	59,477,296.86	0.00%
Life Savings Bank Inc.	0.00	63,382,539.73	63,382,539.73	0.00%
Luzon Development Bank	0.00	379,670,512.51	379,670,512.51	0.00%
Malasiqui Progressive SLB, Inc.	0.00	51,410,073.54	51,410,073.54	0.00%
Malayan Bank Savings & Mortgage Bank	0.00	951,555,667.97	951,555,667.97	0.00%
Maritime SLA Inc.	0.00	66,464,810.00	66,464,810.00	0.00%
Merchants Savings & Loan Association Inc.	0.00	211,302,268.20	211,302,268.20	0.00%
Microfinance Maximum SB (Maxbank)	0.00	61,572,830.22	61,572,830.22	0.00%
Northpoint Development Bank	0.00	51,898,263.72	51,898,263.72	0.00%
Opportunity Microfinance Bank	0.00	129,288,834.77	129,288,834.77	0.00%
Optimum Development Bank	0.00	634,287,677.54	634,287,677.54	0.00%
Pacific Ace Savings Bank	0.00	67,473,628.50	67,473,628.50	0.00%
Pampanga Development Bank	0.00	105,629,668.63	105,629,668.63	0.00%
Penbank Inc.	0.00	229,619,270.61	229,619,270.61	0.00%
Philippine Business Bank	0.00	3,078,009,090.67	3,078,009,090.67	0.00%
Philippine Postal Savings Bank	0.00	412,083,203.45	412,083,203.45	0.00%
Philippine Savings Bank	0.00	12,955,783,472.56	12,955,783,472.56	0.00%
Pridestar Development Bank	0.00	66,223,603.92	66,223,603.92	0.00%
Producers Savings Bank Corporation	0.00	635,624,074.79	635,624,074.79	0.00%
Progress SLA	0.00	84,589,381.44	84,589,381.44	0.00%
Quezon Coconut Producers SLB Inc.	0.00	56,146,490.46	56,146,490.46	0.00%
RCBC Savings Bank	0.00	7,350,378,695.23	7,350,378,695.23	0.00%
Real Bank (A Thrift Bank) Inc.	0.00	538,954,556.95	538,954,556.95	0.00%
Sampaguita SLA, Inc.	0.00	60,638,793.77	60,638,793.77	0.00%
Sterling Bank of Asia	0.00	1,222,952,920.62	1,222,952,920.62	0.00%
Tong Yang Savings Bank Inc.	0.00	393,913,694.90	393,913,694.90	0.00%
Tower Development Bank	0.00	107,938,662.82	107,938,662.82	0.00%
UCPB Savings Bank	0.00	1,931,050,254.27	1,931,050,254.27	0.00%
United Overseas Bank Philippines	0.00	677,818,259.21	677,818,259.21	0.00%
University Savings Bank	0.00	232,846,311.91	232,846,311.91	0.00%
Village SLA, Inc.	0.00	62,091,439.98	62,091,439.98	0.00%
World Partners Bank (A Thrift Bank)	0.00	163,604,634.27	163,604,634.27	0.00%
Grand Total	1,035,420,623.79	69,841,151,705.51	68,805,731,081.72	1.48%
Source: www.bsp.gov.ph

Philippine Commercial Banks with Overstated Capital

In a previous post "BSP's Ampaw Accounting System", we detailed how quite a few banks had overstated capital as a result of BSP's policy of granting "regulatory relief" and allowed the deferment and amortization of unbooked losses arising from:

1. SPV Transactions;
2. Acquisitions of failed/failing banks;
3. Large credit losses

The premise behind this policy is regulatory forbearance that would allow the banks to earn back and write off those losses over time, reducing their need to raise additional capital and avoid  significant dilution of existing shareholders.

In other cases, such as in Asiatrust, banks were literally too weak to write down some additional charges and refused to take the losses.

These measures are not considered "kosher" under Philippine Financial Reporting Standards, resulting in qualified auditors opinions for the bulk of these banks accompanied by the auditor's own estimate on the impact of these unbooked losses on bank capital and assets.

However, the auditor's opinion is issued only once a year, making it difficult for the general public to gauge the financial health of a particular bank in between audited financial statements.  Fortunately, these banks are required to report these unbooked losses in their quarterly Published Statement of Condition as "Deferred Charges Not Yet Written Down," giving the public a way to track these unbooked losses on a quarterly basis. (See www.bsp.gov.ph).

PBCom

Based on the Published Statements of Condition as of September 30, 2011, the Philippine Bank of Communications (PBCom) tops the list.  Its unbooked losses of PHP 5.265 billion more than wipes out its current shareholders equity of PHP 4.089 billion.

Fortunately, the Philippine Bank of Communications has undertaken an extensive quasi-reorganization of its capital structure, following its acquisition by the Ongpin group on July 26, 2011.  In its audited financial statements as of December 31, 2011, the bank wrote off its unbooked losses of PHP  5.921 billion and restated its audited financial statements for 2010 and 2009.  As a result of this conformance to Philippine Financial Reporting Standards, SGV & Co, the bank's auditor, expressed its unqualified opinion on the bank's financial statements.

This move, however, resulted in the bank posting a deficit of PHP 9.655 billion as of December 31, 2011.  The quasi-reorganization aimed to reduce this deficit by half, or PHP 3.9 billion, through the reduction in the par value of its shares from PHP 100 per share to PHP 25 per share.  The par value reduction created PHP 3.94 billion in additional paid-in capital that will be used to offset the  deficit.

The par value reduction will also be accompanies by the infusion of additional capital from the bank's former owners, the Chung and Nubla families, who, on December 28, 2011, reinvested PHP 2.37 billion as their advance subscription to the capital of PBCom.  The quasi-reorganization also called for an increase in the bank's authorized capital stock by PHP 9.5 billion to PHP 27 billion, possibly paving the way for a fresh capital infusion from Indonesian and Malaysian Investor Groups it is in discussions with.

The efforts undertaken by PBCom are a step in the right direction but are currently not sufficient. First of all, the creation of PHP 3.94 billion in additional paid-in capital through par value reduction measures merely shifts capital from one accounting bucket to another.  It bolsters the bank's ability to withstand accounting losses but not real losses.  It does not result in the infusion of real cash.  The net effect on cash flow from this measure is zero.  PBCom will have to undertake more capital infusions similar to the ones from the Chung and Nubla families to truly bolster its capital structure.  But the recognition of the truth behind the accounting fiction created by its regulatory relief measures is good and important first step to solving its financial issues.

Other Banks

Unfortunately, the other banks on this list continue to hang on to their unbooked losses in their audited financial statements, resulting in their auditors continuing to issue qualified opinions on their financial statements.  Let us hope that they adopt the same resolve of PBCom's management in recognizing and addressing the real problems in their capital structure.

Editors Note: Banks highlighted in yellow have been classified as distressed based on their ratio of Total Distressed Assets to their Total Capital Cushion.  For more information regarding this, see a previous blog post "Export and Industry Bank Becomes Even More Insolvent! - September 30, 2011"

Philippine Commercial Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholders Equity
In PHP
September 30, 2011
Bank	Unbooked Losses	SE	Adjusted SE	Impact on SE
Philippine Bank of Communications	5,265,016,082.22	4,088,965,572.94	-1,176,050,509.28	128.76%
United Coconut Planters Bank	10,952,910,818.55	15,700,882,354.87	4,747,971,536.32	69.76%
Philippine National Bank	10,458,498,342.59	31,740,513,590.20	21,282,015,247.61	32.95%
Rizal Commercial Banking Corporation	5,329,074,749.59	40,739,143,784.29	35,410,069,034.70	13.08%
Bank of Commerce	1,259,961,766.40	17,216,195,258.88	15,956,233,492.48	7.32%
Land Bank of the Philippines	4,226,396,188.55	65,642,839,960.25	61,416,443,771.70	6.44%
Philippine Veterans Bank	55,780,113.53	5,338,983,472.43	5,283,203,358.90	1.04%
Banco De Oro Unibank Inc.	308,053,267.21	88,975,509,887.06	88,667,456,619.85	0.35%
Al Amanah Islamic Bank of the Philippines	0.00	500,709,874.02	500,709,874.02	0.00%
Allied Banking Corporation	0.00	16,956,676,338.10	16,956,676,338.10	0.00%
ANZ Banking Group Ltd	0.00	2,541,203,929.44	2,541,203,929.44	0.00%
Asia United Bank	0.00	8,696,451,178.16	8,696,451,178.16	0.00%
Bangkok Bank Public Co. Ltd.	0.00	300,705,341.04	300,705,341.04	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	599,578,966.35	599,578,966.35	0.00%
Bank of the Philippine Islands	0.00	82,819,658,436.74	82,819,658,436.74	0.00%
BDO Private Bank, Inc.	0.00	4,786,066,028.40	4,786,066,028.40	0.00%
China Banking Corporation	0.00	33,346,295,133.54	33,346,295,133.54	0.00%
Chinatrust (Philippines) Commercial Banking Corporation	0.00	5,943,623,655.41	5,943,623,655.41	0.00%
Citibank N.A.	0.00	8,416,476,308.62	8,416,476,308.62	0.00%
Deutsche Bank AG	0.00	2,237,137,603.64	2,237,137,603.64	0.00%
Development Bank of the Philippines	0.00	39,111,276,979.79	39,111,276,979.79	0.00%
East West Banking Corporation	0.00	10,363,422,827.73	10,363,422,827.73	0.00%
HongKong & Shanghai Banking Corporation	0.00	5,312,053,255.20	5,312,053,255.20	0.00%
Internationale Nederlanden Groep Bank	0.00	5,299,477,995.43	5,299,477,995.43	0.00%
JP Morgan Chase Bank National Association	0.00	1,776,303,428.35	1,776,303,428.35	0.00%
Korea Exchange Bank	0.00	622,999,254.69	622,999,254.69	0.00%
Maybank Philippines Inc.	0.00	3,229,189,616.24	3,229,189,616.24	0.00%
Mega International Commercial Bank Co. Ltd	0.00	518,994,163.50	518,994,163.50	0.00%
Metropolitan Bank & Trust Company	0.00	98,546,088,987.74	98,546,088,987.74	0.00%
Mizuho Corporate Bank Ltd - Manila Branch	0.00	1,290,955,398.99	1,290,955,398.99	0.00%
Philippine Trust Company	0.00	14,306,872,181.03	14,306,872,181.03	0.00%
Robinsons Bank Corporation	0.00	5,068,300,216.25	5,068,300,216.25	0.00%
Security Bank Corporation	0.00	28,137,051,304.08	28,137,051,304.08	0.00%
Standard Chartered Bank	0.00	2,084,570,659.58	2,084,570,659.58	0.00%
The Bank of Tokyo - Mitsubishi UFJ Ltd	0.00	798,272,818.08	798,272,818.08	0.00%
Union Bank of the Philippines	0.00	33,802,457,673.54	33,802,457,673.54	0.00%
Grand Total	37,855,691,328.64	687,452,850,139.80	649,597,158,811.16	5.51%
Source: www.bsp.gov.ph