The NPL Ratios of the Philippine Commercial Banking System - As of March 31, 2012

DOSRI.  Short for DOSRI Loans and Transactions.  Otherwise known as loans to Directors, Officers, Stockholders, and Related Interests (DOSRI).  Regulators and Legislators have established laws and regulations that limit DOSRI loans.  The General Banking Act and BSP regulations limit the amount of the loans granted by a bank to a single borrower to 25% of equity.  The amount of individual loans to DOSRI, of which 70% must be secured, should not exceed the amount of the deposit and book value of the investment in the bank.  In the aggregate, loans to DOSRI generally should not exceed the total equity or 15% of the total loan portfolio of the bank, whichever is lower.

In the Philippine Commercial Banking Industry, DOSRI Loans stood at PHP 178.809 billion, or 5.83% of a Total Loan Portfolio - Net (TLP-Net) of PHP 3.067 trillion as of March 31, 2012.

Editor's Note: Data is culled from  the Published Statements of Condition of individual commercial banks found in www.bsp.gov.ph.  Banks highlighted in yellow are classified as Distressed Banks.  The level of distressed is measured by the Ratio of their Total Distressed Assets/Total Capital Cushion as of March 31, 2012.  See a previous blog post: "Philippine Commercial Banks Show Further Improvement in the 1st Qtr. of 2012". 

Philippine Commercial Banking System
DOSRI as % of TLP-Net
March 31, 2012
	DOSRI	TLP-Net	DOSRI/TLP-Net
Bank	(In PHP)	(In PHP)	(In %)
Development Bank of the Philippines	35,066,251,880.40	113,383,166,069.68	30.93%
Land Bank of the Philippines	65,941,740,423.94	245,476,254,509.56	26.86%
Robinsons Bank Corporation	948,815,796.74	16,829,344,126.37	5.64%
China Banking Corporation	7,839,468,006.74	143,566,392,654.41	5.46%
Banco De Oro Unibank Inc.	30,241,272,794.28	630,024,685,068.84	4.80%
East West Banking Corporation	2,066,619,470.92	48,229,620,025.37	4.28%
Metropolitan Bank & Trust Company	14,115,251,243.72	342,355,964,631.46	4.12%
Philippine National Bank	4,738,665,599.82	119,929,076,159.06	3.95%
Allied Banking Corporation	3,220,978,128.04	82,530,707,593.75	3.90%
Rizal Commercial Banking Corporation	5,031,312,362.24	143,133,213,862.55	3.52%
Bank of Commerce	1,116,602,264.08	47,689,501,912.16	2.34%
Maybank Philippines Inc.	547,655,000.86	26,774,402,407.62	2.05%
Bank of the Philippine Islands	5,175,673,420.34	322,665,049,923.77	1.60%
Asia United Bank	262,762,978.40	26,930,289,742.30	0.98%
HongKong & Shanghai Banking Corporation	555,550,708.78	75,105,650,581.65	0.74%
Bank of America N.A.	29,171,452.32	3,944,442,437.77	0.74%
Union Bank of the Philippines	726,403,985.61	118,749,166,238.92	0.61%
Citibank N.A.	613,832,935.03	125,520,385,256.88	0.49%
United Coconut Planters Bank	222,316,852.43	61,428,225,134.53	0.36%
JP Morgan Chase Bank National Association	57,356,180.34	22,078,442,448.28	0.26%
Philippine Bank of Communications	21,672,864.50	9,577,646,488.19	0.23%
Philippine Veterans Bank	53,081,386.27	25,313,665,800.06	0.21%
Chinatrust (Philippines) Commercial Banking Corporation	18,400,571.63	12,509,747,028.48	0.15%
Security Bank Corporation	126,795,681.91	90,879,580,509.13	0.14%
ANZ Banking Group Ltd	33,386,475.48	26,915,027,475.10	0.12%
Standard Chartered Bank	25,673,482.17	39,680,547,708.46	0.06%
The Bank of Tokyo - Mitsubishi UFJ Ltd	11,717,016.24	21,821,207,563.30	0.05%
Korea Exchange Bank	171,680.00	5,025,148,762.42	0.00%
Bangkok Bank Public Co. Ltd.	0.00	3,035,764,310.20	0.00%
Bank of China Limited - Manila Branch	0.00	3,974,303,432.60	0.00%
BDO Private Bank, Inc.	0.00	6,846,581,084.00	0.00%
Deutsche Bank AG	0.00	22,470,704,605.42	0.00%
Internationale Nederlanden Groep Bank	0.00	17,062,116,314.65	0.00%
Mega International Commercial Bank Co. Ltd	0.00	6,758,670,439.66	0.00%
Mizuho Corporate Bank Ltd - Manila Branch	0.00	27,498,793,336.82	0.00%
Philippine Trust Company	0.00	31,445,091,414.40	0.00%
Al Amanah Islamic Bank of the Philippines	NA	NA	NA
Grand Total	178,808,600,643.23	3,067,158,577,057.82	5.83%

Source: www.bsp.gov.ph

Of the 37 banks in this list, eight banks had no DOSRI loans as of March 31, 2012.  Of the 28 banks that reported DOSRI loans, the ratio of DOSRI Loans to Total Loan Portfolio - Net was slightly higher (6.07%) than the 5.83% ratio reported for all commercial banks as of March 31, 2012.  The banks with the highest ratio of DOSRI Loans to TLP-Net were government banks:

1. Development Bank of the Philippines (30.93% of TLP-Net)
2. Land Bank of the Philippines (26.86% of TLP-Net)

DOSRI rules indicate that DOSRI Loans, in the aggregate, should not exceed the total equity of the bank.  Therefore banks with significantly high DOSRI Loans as a percentage of Total Stockholders Equity (SE) may be approaching DOSRI Limits.  In this matter, two government banks again stand out:

1. Development Bank of the Philippines (94.08% of SE)
2. Land Bank of the Philippines (91.94% of SE)

A third bank, Banco de Oro Unibank has DOSRI Loans equivalent to 30.61% of SE as of March 31, 2012, down significantly from 44.54% as of December 31, 2011.  On an overall basis, DOSRI Loans comprised 24.01% of Stockholders Equity as of March 31, 2012, down slightly from 27.77% as of December 31, 2011.

Philippine Commercial Banking System
DOSRI as % of Stockholders Equity
March 31, 2012
	DOSRI	SE	DOSRI/SE
Bank	(In PHP)	(In PHP)	(In %)
Land Bank of the Philippines	65,941,740,423.94	70,094,481,720.76	94.08%
Development Bank of the Philippines	35,066,251,880.40	38,140,888,446.93	91.94%
Banco De Oro Unibank Inc.	30,241,272,794.28	98,807,290,670.51	30.61%
China Banking Corporation	7,839,468,006.74	36,835,361,632.68	21.28%
Robinsons Bank Corporation	948,815,796.74	5,315,208,370.33	17.85%
Allied Banking Corporation	3,220,978,128.04	18,065,606,042.95	17.83%
East West Banking Corporation	2,066,619,470.92	13,313,574,609.14	15.52%
Metropolitan Bank & Trust Company	14,115,251,243.72	105,180,575,473.51	13.42%
Philippine National Bank	4,738,665,599.82	36,654,293,490.05	12.93%
Rizal Commercial Banking Corporation	5,031,312,362.24	41,519,821,454.71	12.12%
HongKong & Shanghai Banking Corporation	555,550,708.78	4,852,503,309.39	11.45%
Maybank Philippines Inc.	547,655,000.86	5,351,071,269.49	10.23%
Citibank N.A.	613,832,935.03	7,798,122,283.60	7.87%
Bank of the Philippine Islands	5,175,673,420.34	88,219,897,458.02	5.87%
Bank of Commerce	1,116,602,264.08	19,531,355,463.52	5.72%
Bank of America N.A.	29,171,452.32	596,946,705.20	4.89%
JP Morgan Chase Bank National Association	57,356,180.34	1,776,225,884.07	3.23%
Asia United Bank	262,762,978.40	9,940,242,367.46	2.64%
Standard Chartered Bank	25,673,482.17	1,306,230,414.81	1.97%
Union Bank of the Philippines	726,403,985.61	40,655,375,592.49	1.79%
The Bank of Tokyo - Mitsubishi UFJ Ltd	11,717,016.24	722,158,670.65	1.62%
ANZ Banking Group Ltd	33,386,475.48	2,262,570,661.61	1.48%
United Coconut Planters Bank	222,316,852.43	17,895,564,429.08	1.24%
Philippine Veterans Bank	53,081,386.27	5,261,907,247.41	1.01%
Security Bank Corporation	126,795,681.91	31,432,971,028.36	0.40%
Chinatrust (Philippines) Commercial Banking Corporation	18,400,571.63	6,075,781,712.98	0.30%
Philippine Bank of Communications	21,672,864.50	7,931,155,088.99	0.27%
Korea Exchange Bank	171,680.00	518,588,577.59	0.03%
Bangkok Bank Public Co. Ltd.	0.00	1,139,977,349.27	0.00%
Bank of China Limited - Manila Branch	0.00	627,073,822.36	0.00%
BDO Private Bank, Inc.	0.00	5,129,217,466.83	0.00%
Deutsche Bank AG	0.00	1,479,134,481.18	0.00%
Internationale Nederlanden Groep Bank	0.00	2,666,677,041.42	0.00%
Mega International Commercial Bank Co. Ltd	0.00	646,824,154.50	0.00%
Mizuho Corporate Bank Ltd - Manila Branch	0.00	1,470,853,832.00	0.00%
Philippine Trust Company	0.00	15,430,714,876.97	0.00%
Al Amanah Islamic Bank of the Philippines	NA	NA	NA
Grand Total	178,808,600,643.23	744,646,243,100.82	24.01%

Source: www.bsp.gov.ph

Banks often take pains to avoid DOSRI Loans from falling past due. Although bank policies often state that DOSRI Loans are made “on commercial, arm's length terms, i.e., substantially on the same terms as loans to other individuals and businesses of comparable risks” (See RCBC's Consolidated Financial Statements as of December 31, 2010), loan underwriting standards should be tighter because a past due DOSRI loan reflects badly on the bank.    DOSRI Loans that fall past due are often:

1. Written off as soon as possible;
2. Refinanced or Restructured to become current; or are
3. Technically reclassified as a general NPL (like if a loan to a former bank officer falls past due). 

As a result, only PHP 0.575 billion of DOSRI Loans or 0.32% are past due out of a Total DOSRI Loan Portfolio of PHP 178.809 billion as of March 31, 2012, down significantly from 0.77% as of December 31, 2011.

Philippine Commercial Banking System
DOSRI Past Due as % of DOSRI
March 31, 2012
	DOSRI Past Due	DOSRI	DOSRI Past Due/DOSRI
Bank	(In PHP)	(In PHP)	(In %)
Rizal Commercial Banking Corporation	526,011,201.38	5,031,312,362.24	10.45%
Philippine Bank of Communications	1,423,242.21	21,672,864.50	6.57%
Asia United Bank	4,924,599.04	262,762,978.40	1.87%
East West Banking Corporation	36,460,501.61	2,066,619,470.92	1.76%
United Coconut Planters Bank	3,792,637.15	222,316,852.43	1.71%
Philippine Veterans Bank	750,211.79	53,081,386.27	1.41%
Chinatrust (Philippines) Commercial Banking Corporation	35,694.90	18,400,571.63	0.19%
Bank of the Philippine Islands	1,987,636.32	5,175,673,420.34	0.04%
China Banking Corporation	7,026.07	7,839,468,006.74	0.00%
Union Bank of the Philippines	0.00	726,403,985.61	0.00%
Standard Chartered Bank	0.00	25,673,482.17	0.00%
Security Bank Corporation	0.00	126,795,681.91	0.00%
Robinsons Bank Corporation	0.00	948,815,796.74	0.00%
Philippine National Bank	0.00	4,738,665,599.82	0.00%
Metropolitan Bank & Trust Company	0.00	14,115,251,243.72	0.00%
Maybank Philippines Inc.	0.00	547,655,000.86	0.00%
Land Bank of the Philippines	0.00	65,941,740,423.94	0.00%
HongKong & Shanghai Banking Corporation	0.00	555,550,708.78	0.00%
Development Bank of the Philippines	0.00	35,066,251,880.40	0.00%
Bank of Commerce	0.00	1,116,602,264.08	0.00%
Banco De Oro Unibank Inc.	0.00	30,241,272,794.28	0.00%
ANZ Banking Group Ltd	0.00	33,386,475.48	0.00%
Allied Banking Corporation	0.00	3,220,978,128.04	0.00%
Al Amanah Islamic Bank of the Philippines	NA	NA	NA
Bangkok Bank Public Co. Ltd.	0.00	0.00	NA
Bank of America N.A.	0.00	29,171,452.32	NA
Bank of China Limited - Manila Branch	0.00	0.00	NA
BDO Private Bank, Inc.	0.00	0.00	NA
Citibank N.A.	0.00	613,832,935.03	NA
Deutsche Bank AG	0.00	0.00	NA
Internationale Nederlanden Groep Bank	0.00	0.00	NA
JP Morgan Chase Bank National Association	0.00	57,356,180.34	NA
Korea Exchange Bank	0.00	171,680.00	NA
Mega International Commercial Bank Co. Ltd	0.00	0.00	NA
Mizuho Corporate Bank Ltd - Manila Branch	0.00	0.00	NA
Philippine Trust Company	0.00	0.00	NA
The Bank of Tokyo - Mitsubishi UFJ Ltd	0.00	11,717,016.24	NA
Grand Total	575,392,750.47	178,808,600,643.23	0.32%

Source: www.bsp.gov.ph

Given all the measures banks can take to prevent a DOSRI Loan from falling past due, it is not surprising to find past due rates of DOSRI Loans significantly below the NPL ratios of their Total Loan Portfolios.  What is generally surprising is to find DOSRI Loans that fall past due in significantly higher proportions than the banks NPL ratio on their Total Loan Portfolios.  Only three banks fall into this category:

1. Rizal Commercial Banking Corporation (DOSRI Past Due Ratio of 10.45% versus an NPL Ratio of 0.86%)
2. Philippine Bank of Communications (DOSRI Past Due Ratio of 6.57% versus an NPL Ratio of 1.02%)

The NPL Ratio of the Philippine Commercial Banking System has ticked up slightly to 2.53% of Total Loan Portfolio - Net as of March 31, 2012 from 2.40% as of December 31, 2011.

Philippine Commercial Banking System
NPL as % of TLP-Net
March 31, 2012
	NPL	TLP-Net	NPL/TLP
Bank	(In PHP)	(In PHP)	(In %)
Bank of Commerce	6,220,748,917.22	47,689,501,912.16	13.04%
United Coconut Planters Bank	4,616,649,136.80	61,428,225,134.53	7.52%
Philippine Veterans Bank	1,778,672,048.33	25,313,665,800.06	7.03%
Philippine National Bank	6,693,723,286.21	119,929,076,159.06	5.58%
Development Bank of the Philippines	5,439,228,424.71	113,383,166,069.68	4.80%
East West Banking Corporation	2,176,706,583.32	48,229,620,025.37	4.51%
Allied Banking Corporation	3,555,390,024.89	82,530,707,593.75	4.31%
Robinsons Bank Corporation	570,305,290.15	16,829,344,126.37	3.39%
Land Bank of the Philippines	8,054,725,930.55	245,476,254,509.56	3.28%
Maybank Philippines Inc.	841,786,418.14	26,774,402,407.62	3.14%
Philippine Trust Company	956,633,100.98	31,445,091,414.40	3.04%
China Banking Corporation	4,269,236,686.52	143,566,392,654.41	2.97%
Standard Chartered Bank	1,143,617,774.62	39,680,547,708.46	2.88%
Chinatrust (Philippines) Commercial Banking Corporation	357,060,889.15	12,509,747,028.48	2.85%
Union Bank of the Philippines	2,964,664,674.04	118,749,166,238.92	2.50%
Banco De Oro Unibank Inc.	13,360,637,051.26	630,024,685,068.84	2.12%
Bank of the Philippine Islands	5,296,281,760.20	322,665,049,923.77	1.64%
Asia United Bank	434,043,308.35	26,930,289,742.30	1.61%
Metropolitan Bank & Trust Company	4,845,154,297.61	342,355,964,631.46	1.42%
HongKong & Shanghai Banking Corporation	851,487,295.89	75,105,650,581.65	1.13%
Philippine Bank of Communications	97,945,495.60	9,577,646,488.19	1.02%
Bangkok Bank Public Co. Ltd.	28,514,155.55	3,035,764,310.20	0.94%
Rizal Commercial Banking Corporation	1,235,495,282.80	143,133,213,862.55	0.86%
Citibank N.A.	1,073,738,265.84	125,520,385,256.88	0.86%
Security Bank Corporation	725,943,238.00	90,879,580,509.13	0.80%
Korea Exchange Bank	34,374,632.02	5,025,148,762.42	0.68%
Bank of China Limited - Manila Branch	8,660,895.91	3,974,303,432.60	0.22%
ANZ Banking Group Ltd	23,339,114.85	26,915,027,475.10	0.09%
The Bank of Tokyo - Mitsubishi UFJ Ltd	125,938.80	21,821,207,563.30	0.00%
Internationale Nederlanden Groep Bank	87.84	17,062,116,314.65	0.00%
Bank of America N.A.	0.00	3,944,442,437.77	0.00%
BDO Private Bank, Inc.	0.00	6,846,581,084.00	0.00%
Deutsche Bank AG	0.00	22,470,704,605.42	0.00%
JP Morgan Chase Bank National Association	0.00	22,078,442,448.28	0.00%
Mega International Commercial Bank Co. Ltd	0.00	6,758,670,439.66	0.00%
Mizuho Corporate Bank Ltd - Manila Branch	0.00	27,498,793,336.82	0.00%
Al Amanah Islamic Bank of the Philippines	NA	NA	NA
Grand Total	77,654,890,006.15	3,067,158,577,057.82	2.53%

Source: www.bsp.gov.ph

However, quite a few banks have significantly high NPLs as a percentage of their stockholders equity as of March 31, 2012.  These are as follows:

1. Standard Chartered Bank (NPL/SE Ratio of 87.55%)
2. Philippine Veterans Bank (NPL/SE Ratio of 33.80%)
3. Bank of Commerce (NPL/SE Ratio of 31.85%)
4. United Coconut Planters Bank (NPL/SE Ratio of 25.80%)

Again, any further deterioration in the value of these banks NPLs may lead to a significant reduction of the bank's capital, particularly if the bank has not adequately reserved capital for future losses on these NPLs.  But of the four banks listed above, three banks are listed as distressed:

1. Philippine Veterans Bank
2. Bank of Commerce
3. United Coconut Planters Bank

See a previous blog post: "Philippine Commercial Banks Show Further Improvement in the 1st Qtr. of 2012".

Philippine Commercial Banking System
NPL as % of SE
March 31, 2012
	NPL	SE	NPL/SE
Bank	(In PHP)	(In PHP)	(In %)
Standard Chartered Bank	1,143,617,774.62	1,306,230,414.81	87.55%
Philippine Veterans Bank	1,778,672,048.33	5,261,907,247.41	33.80%
Bank of Commerce	6,220,748,917.22	19,531,355,463.52	31.85%
United Coconut Planters Bank	4,616,649,136.80	17,895,564,429.08	25.80%
Allied Banking Corporation	3,555,390,024.89	18,065,606,042.95	19.68%
Philippine National Bank	6,693,723,286.21	36,654,293,490.05	18.26%
HongKong & Shanghai Banking Corporation	851,487,295.89	4,852,503,309.39	17.55%
East West Banking Corporation	2,176,706,583.32	13,313,574,609.14	16.35%
Maybank Philippines Inc.	841,786,418.14	5,351,071,269.49	15.73%
Development Bank of the Philippines	5,439,228,424.71	38,140,888,446.93	14.26%
Citibank N.A.	1,073,738,265.84	7,798,122,283.60	13.77%
Banco De Oro Unibank Inc.	13,360,637,051.26	98,807,290,670.51	13.52%
China Banking Corporation	4,269,236,686.52	36,835,361,632.68	11.59%
Land Bank of the Philippines	8,054,725,930.55	70,094,481,720.76	11.49%
Robinsons Bank Corporation	570,305,290.15	5,315,208,370.33	10.73%
Union Bank of the Philippines	2,964,664,674.04	40,655,375,592.49	7.29%
Korea Exchange Bank	34,374,632.02	518,588,577.59	6.63%
Philippine Trust Company	956,633,100.98	15,430,714,876.97	6.20%
Bank of the Philippine Islands	5,296,281,760.20	88,219,897,458.02	6.00%
Chinatrust (Philippines) Commercial Banking Corporation	357,060,889.15	6,075,781,712.98	5.88%
Metropolitan Bank & Trust Company	4,845,154,297.61	105,180,575,473.51	4.61%
Asia United Bank	434,043,308.35	9,940,242,367.46	4.37%
Rizal Commercial Banking Corporation	1,235,495,282.80	41,519,821,454.71	2.98%
Bangkok Bank Public Co. Ltd.	28,514,155.55	1,139,977,349.27	2.50%
Security Bank Corporation	725,943,238.00	31,432,971,028.36	2.31%
Bank of China Limited - Manila Branch	8,660,895.91	627,073,822.36	1.38%
Philippine Bank of Communications	97,945,495.60	7,931,155,088.99	1.23%
ANZ Banking Group Ltd	23,339,114.85	2,262,570,661.61	1.03%
The Bank of Tokyo - Mitsubishi UFJ Ltd	125,938.80	722,158,670.65	0.02%
Internationale Nederlanden Groep Bank	87.84	2,666,677,041.42	0.00%
Bank of America N.A.	0.00	596,946,705.20	0.00%
BDO Private Bank, Inc.	0.00	5,129,217,466.83	0.00%
Deutsche Bank AG	0.00	1,479,134,481.18	0.00%
JP Morgan Chase Bank National Association	0.00	1,776,225,884.07	0.00%
Mega International Commercial Bank Co. Ltd	0.00	646,824,154.50	0.00%
Mizuho Corporate Bank Ltd - Manila Branch	0.00	1,470,853,832.00	0.00%
Al Amanah Islamic Bank of the Philippines	NA	NA	NA
Grand Total	77,654,890,006.15	744,646,243,100.82	10.43%

Source: www.bsp.gov.ph