The Current State of the Philippine Rural and Cooperative Banking System

This post is an attempt to estimate the current financial health of the Rural and Cooperative Banking System.  Although the BSP does not publish the Statements of Condition of each rural and cooperative bank, they do give out consolidated statistics on www.bsp.gov.ph.  The latest statistics are as of March 31, 2011.

On an overall basis, rural and cooperative banks are relatively healthy.  However, the ratio of their distressed assets to their capital cushion remains elevated at 78.22% as of March 31, 2011.  The ratio for rural banks, in particular,  is slightly lower at 74.87%.  Cooperative banks, on the other hand, are in the danger zone (ratio > 100%), with a ratio of 119.90% as of March 31, 2011.  Fortunately, they only have  a miniscule PHP 3.428 billion in distressed assets and do not pose any systemic risk to the Philippine banking system.

Philippine Rural and Cooperative Banking System
Total Distressed Assets/ Total Capital Cushion
March 31, 2011
		March 31, 2011
	Total Distressed Assets (In PHP Million)	Total Capital Cushion (In PHP Million)	Distressed Assets/ Total Capital Cushion (In %)
Rural Banks	26,631	35,568	74.87%
Cooperative Banks	3,428	2,859	119.90%
Total	30,059	38,427	78.22%

Slight Deterioration in the Solvency of Listed Philippine Banks

Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets increased by PHP 14.625 billion or 4.80% from June 30, 2011 to September 30, 2011.  This was slightly offset by an increase of PHP 9.356 billion or 2.19% in the Total Capital Cushion of these banks during the same period.  As a result, the Listed Banks Ratio of Distressed Assets to Total Capital Cushion increased by 1.82% from 71.32% as of June 30, 2011 to 73.14% as of September 30, 2011.

Please note that the ratio of Distressed Assets to Total Capital Cushion of two banks on this list are above the borderline level of 100.00%.  These banks have been borderline insolvent since June 30, 2011.  The banks that exhibited significant increases in their insolvency ratios were Export and Industry Bank (71.21%), China Banking Corporation (9.34%), Metropolitan Bank and Trust Company (6.46%) and Security Bank Corporation (3.30%).  Only two banks showed drops in their insolvency ratios, Philippine Savings Bank (-0.22%) and Union Bank of the Philippines (-0.39%).

Listed Philippine Banks
Total Distressed Assets/ Total Capital Cushion
June 30, 2011 to September 30, 2011
	June 30, 2011	September 30, 2011	Variance		% Variance
Banco de Oro Unibank	59.95%	61.04%	1.09%		1.81%
Bank of the Philippine Islands	68.23%	69.39%	1.16%		1.71%
China Banking Corporation	53.51%	58.51%	5.00%		9.34%
Export and Industry Bank	862.13%	1476.07%	613.94%		71.21%
Metropolitan Bank and Trust Company	67.10%	71.43%	4.33%		6.46%
Philippine Savings Bank	79.47%	79.30%	-0.17%		-0.22%
Rizal Commercial Banking Corporation	88.89%	89.21%	0.31%		0.35%
Security Bank Corporation	46.50%	48.03%	1.53%		3.30%
Union Bank of the Philippines	101.23%	100.84%	-0.39%		-0.39%

Listed Philippine Banks
Total Distressed Assets/ Total Capital Cushion
June 30, 2011 to September 30, 2011
		June 30, 2011				September 30, 2011				Variance
	Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)		Total Distressed Assets (In PHP Billion)	Total Capital Cushion (In PHP Billion)	Distressed Assets/ Total Capital Cushion (In %)
Export and Industry Bank	14.458	1.677	862.13%		13.388	.907	1476.07%		-1.070	-.770	613.94%
Union Bank of the Philippines	38.686	38.215	101.23%		38.622	38.301	100.84%		-.064	.086	-0.39%
Rizal Commercial Banking Corporation	29.423	33.099	88.89%		32.720	36.679	89.21%		3.297	3.580	0.31%
Philippine Savings Bank	11.425	14.150	79.47%		11.292	14.240	79.30%		.047	.090	-0.17%
Metropolitan Bank and Trust Company	61.204	91.212	67.10%		63.939	89.510	71.43%		2.735	-1.702	4.33%
Bank of the Philippine Islands	52.695	77.235	68.23%		57.620	83.386	69.39%		5.167	6.151	1.16%
Banco de Oro Unibank	65.864	109.861	59.95%		67.522	110.622	61.04%		1.658	.761	1.09%
China Banking Corporation	18.929	35.375	53.51%		21.369	36.523	58.51%		2.440	1.148	5.00%
Security Bank Corporation	12.417	26.704	46.50%		12.832	26.716	48.03%		.415	.012	1.53%
Total	304.921	427.528	71.32%		319.546	436.884	73.14%		14.625	9.356	1.82%