The Top Distressed Philippine Banks as of September 30, 2012

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 withoutwarning:  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.  A bank that has a Distressed Ratio greater than 100% is flagged as borderline insolvent (highlighted in yellow).  For a more detailed discussion of this ratio, please visit a previous blog post: The Texas Ratio of Select Philippine Banks

This is a list of the top distressed Universal and Commercial (U/KB) as well as Thrift Banks in the Philippines as of September 30, 2012.  It updates the two previous blog posts: "The Top Distressed Philippine Banks as of June 30, 2012" and "The Top Distressed Philippine Banks as of March 31, 2012".

To see where your bank stands relative to these banks, please check the following previous blog posts:   "Philippine Thrift Banks Deteriorate in the 3rd Quarter of 2012" and  "Philippine U/KBs Show Some Deterioration in the 2nd Qtr. of 2012" and "Philippine Thrift Banks Continue to Improve in the 2nd Quarter of 2012".

Top Distressed Philippine Banks
By Total Distressed Assets/ Total Capital Cushion
September 30, 2012
In PhP
	September 30, 2012
Bank	Type of Bank	Total Distressed Assets (In PhP)	Total Capital Cushion (In PhP)	Distressed Assets/ Total Capital Cushion (In %)
The Real Bank (A Thrift Bank) Inc.	Thrift Bank	9,516,786,838.48	905,196,918.56	1051.35%
Bank of China Limited - Manila Branch	U/KB	5,499,250,349.88	674,694,698.46	815.07%
Legazpi Savings Bank Inc.	Thrift Bank	1,520,590,623.29	192,381,540.63	790.40%
United Coconut Planters Bank	U/KB	57,684,765,438.46	8,345,167,762.71	691.24%
Village SLA, Inc.	Thrift Bank	479,384,798.66	85,016,613.24	563.87%
Comsavings Bank	Thrift Bank	2,197,560,806.67	473,592,378.81	464.02%
Iloilo City Development Bank	Thrift Bank	270,977,193.00	66,264,793.70	408.93%
Planters Development Bank	Thrift Bank	13,269,185,069.91	4,513,127,703.18	294.01%
Citibank N.A.	U/KB	32,833,020,831.09	12,989,088,119.39	252.77%
Bataan Development Bank	Thrift Bank	174,116,633.54	77,756,277.41	223.93%
RCBC Savings Bank	Thrift Bank	13,586,838,184.29	7,221,683,741.37	188.14%
China Bank Savings	Thrift Bank	1,898,139,702.21	1,022,928,082.14	185.56%
Standard Chartered Bank	U/KB	5,005,651,960.87	2,819,162,911.12	177.56%
Farmers Savings & Loan Bank	Thrift Bank	206,232,294.40	119,121,673.90	173.13%
Bank of Commerce	U/KB	32,651,852,421.91	19,825,006,462.21	164.70%
Philippine Bank of Communications	U/KB	8,517,589,737.08	5,361,593,642.74	158.86%
Philippine National Bank	U/KB	50,799,838,940.95	32,504,359,516.71	156.29%
University Savings Bank	Thrift Bank	338,464,989.50	229,473,016.94	147.50%
Equicom SB	Thrift Bank	753,567,755.55	526,505,528.17	143.13%
Business & Consumers Bank	Thrift Bank	111,827,390.14	79,127,256.40	141.33%
Luzon Development Bank	Thrift Bank	646,205,486.15	467,765,497.15	138.15%
Hiyas Savings & Loan Bank	Thrift Bank	234,237,686.41	171,907,664.98	136.26%
Opportunity Kauswagan Bank, Inc.	Thrift Bank	186,298,329.74	151,324,998.37	123.11%
Silangan Savings and Loan Bank, Inc.	Thrift Bank	62,568,695.13	51,238,430.87	122.11%
Malayan Bank Savings & Mortgage Bank	Thrift Bank	1,351,217,546.60	1,151,079,672.82	117.39%
Korea Exchange Bank	U/KB	659,493,409.58	595,807,841.52	110.69%
Producers Savings Bank	Thrift Bank	672,527,873.94	649,839,788.62	103.49%
Philippine Veterans Bank	U/KB	6,780,597,813.35	6,638,430,212.16	102.14%
Philippine Postal Savings Bank	Thrift Bank	840,011,784.78	829,916,335.27	101.22%
Security Bank Savings Corporation	Thrift Bank	1,351,287,204.45	1,335,142,276.18	101.21%
Grand Total		250,100,087,790.01	110,073,701,355.73	227.21%

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 September 30, 2012 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.

Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012

Last July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged banks, particularly Universal and Commercial 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."

We answered this question for Universal and Commercial Banks in a previous blog post (See: "Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012"  But can thrift banks do so? The answer is: yes but only for some banks.  As can be seen from the table below, seven banks have the Stockholders Equity (SE) to absorb these Deferred Charges:

1. Bataan Development Bank (Deferred Charges of 17.93% of SE)
2. Planters Development Bank (15.73% of SE)
3. Citibank Savings Inc. (9.09% of SE)
4. Card SME Bank Inc, (3.01% of SE)
5. Wealth Bank (1.76% of SE)
6. Security Bank Savings Corporation (0.20% of SE)
7. Farmers Savings & Loan Bank (0.00% of SE)

It must be noted that three of these banks are considered borderline insolvent (highlighted in yellow): Bataan Development Bank, Planters Development Bank, and Farmers Savings & Loan Bank. For more information on distressed banks, please see the previous blog post: "Philippine Thrift Banks Deteriorate in the 3rd Quarter of 2012".

Retained Earnings

Only three banks have sufficient Retained Earnings (RE) to absorb their unbooked losses:

1. Planters Development Bank (Deferred Charges of 27.41% of RE)
2. Wealth Bank (Deferred Charges of 11.13% of RE)
3. Farmers Savings & Loan Bank (Deferred Charges 0.01% of RE)

For one of the banks, Deferred Charges will exceed their Retained Earnings:

1. Bataan Development Bank (Deferred Charges of 194.46% of RE)

Three of the banks have negative Retained Earnings.  As such, they may not have the capacity to absorb additional losses.

1. Security Bank Savings Corporation (Retained Earnings of PhP -564.714 million vs. Deferred Charges of PhP 1.452 million)
2. Citibank Savings Inc. (Retained Earnings of -2.373 billion vs. Deferred Charges of PhP 165.123 million)
3. Card SME Bank Inc. (Retained Earnings of PhP -36.186 million vs. Deferred Charges of PhP 5.555 million)

For more information of these Deferred Charges, please consult four previous blog posts

"Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - June 30, 2012", "Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings?", "Philippine Thrift Banks with Overstated Capital as of Year End 2011" and "BSP's Ampaw Accounting System".

Philippine Thrift Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholders Equity
In Php
September 30, 2012
Bank	Unbooked Losses	SE	Adjusted SE	Impact on SE
Bataan Development Bank	12,121,205.73	67,597,577.61	55,476,371.88	17.93%
Planters Development Bank	617,205,016.53	3,924,090,032.92	3,306,885,016.39	15.73%
Citibank Savings Inc.	165,122,557.37	1,817,029,562.88	1,651,907,005.51	9.09%
Card SME Bank Inc. (A Thrift Bank)	5,554,850.27	184,615,481.92	179,060,631.65	3.01%
Wealth Bank - A Development Bank	6,486,091.49	369,496,704.40	363,010,612.91	1.76%
Security Bank Savings Corporation	1,451,702.38	736,065,900.73	734,614,198.35	0.20%
Farmers Savings & Loan Bank	2,080.83	102,604,061.96	102,601,981.13	0.00%
Allied Savings Bank	0.00	956,183,719.07	956,183,719.07	0.00%
Bank One Savings and Trust Corp.	0.00	523,078,931.29	523,078,931.29	0.00%
Bataan SLA	0.00	74,116,683.86	74,116,683.86	0.00%
BDO Elite Savings Bank	0.00	1,539,407,664.50	1,539,407,664.50	0.00%
BPI Direct Savings Bank	0.00	739,167,639.63	739,167,639.63	0.00%
BPI Family Savings Bank	0.00	15,292,851,941.12	15,292,851,941.12	0.00%
BPI Globe Banko Inc. Savings Bank	0.00	349,094,796.54	349,094,796.54	0.00%
Business & Consumers Bank	0.00	80,158,164.99	80,158,164.99	0.00%
Century Savings Bank	0.00	893,351,154.16	893,351,154.16	0.00%
China Bank Savings	0.00	1,109,583,840.73	1,109,583,840.73	0.00%
City Savings Bank	0.00	2,103,900,942.28	2,103,900,942.28	0.00%
CityState Savings Bank	0.00	782,398,842.10	782,398,842.10	0.00%
Comsavings Bank	0.00	352,249,570.43	352,249,570.43	0.00%
Cordillera Savings Bank	0.00	99,908,118.27	99,908,118.27	0.00%
Dumaguete City Development Bank	0.00	210,023,861.68	210,023,861.68	0.00%
Dungganon Bank	0.00	64,495,286.01	64,495,286.01	0.00%
Equicom SB	0.00	463,045,239.53	463,045,239.53	0.00%
First Consolidated Bank	0.00	1,740,308,076.63	1,740,308,076.63	0.00%
Hiyas Savings & Loan Bank	0.00	159,176,956.30	159,176,956.30	0.00%
HSBC Savings Bank (Phils) Inc.	0.00	3,068,645,532.31	3,068,645,532.31	0.00%
Iloilo City Development Bank	0.00	64,575,154.89	64,575,154.89	0.00%
Isla Bank (A Thrift Bank) Inc.	0.00	632,239,119.74	632,239,119.74	0.00%
Legazpi Savings Bank Inc.	0.00	181,260,590.59	181,260,590.59	0.00%
Lemery Savings & Loan Bank, Inc.	0.00	70,264,263.50	70,264,263.50	0.00%
Life Savings Bank	0.00	63,720,809.87	63,720,809.87	0.00%
Luzon Development Bank	0.00	406,399,302.47	406,399,302.47	0.00%
Malasiqui Progressive SLB, Inc.	0.00	50,112,079.58	50,112,079.58	0.00%
Malayan Bank Savings & Mortgage Bank	0.00	1,030,272,614.97	1,030,272,614.97	0.00%
Maritime SLA	0.00	66,102,437.80	66,102,437.80	0.00%
Merchants Savings & Loan Association Inc.	0.00	6,502,899,210.43	6,502,899,210.43	0.00%
Metro Cebu Public Savings Bank	0.00	65,801,135.23	65,801,135.23	0.00%
Microfinance Maximum SB (Maxbank)	0.00	62,487,046.42	62,487,046.42	0.00%
Northpoint Development Bank	0.00	78,747,771.22	78,747,771.22	0.00%
Opportunity Kauswagan Bank, Inc.	0.00	94,831,661.78	94,831,661.78	0.00%
Optimum Development Bank	0.00	674,499,273.91	674,499,273.91	0.00%
Pacific Ace Savings Bank	0.00	73,164,054.62	73,164,054.62	0.00%
Pampanga Development Bank	0.00	107,312,295.20	107,312,295.20	0.00%
Penbank, Inc.	0.00	261,521,790.11	261,521,790.11	0.00%
Philippine Business Bank	0.00	4,371,356,169.80	4,371,356,169.80	0.00%
Philippine Postal Savings Bank	0.00	704,043,495.18	704,043,495.18	0.00%
Philippine Resources Savings Banking Corporation	0.00	1,251,275,177.34	1,251,275,177.34	0.00%
Philippine Savings Bank	0.00	13,537,819,146.69	13,537,819,146.69	0.00%
Pridestar Development Bank	0.00	67,592,604.71	67,592,604.71	0.00%
Producers Savings Bank	0.00	720,392,659.44	720,392,659.44	0.00%
Progress SLA	0.00	83,884,449.90	83,884,449.90	0.00%
Quezon Coconut Producers SLB Inc.	0.00	56,890,460.69	56,890,460.69	0.00%
RCBC Savings Bank	0.00	7,166,281,446.81	7,166,281,446.81	0.00%
Sampaguita SLA	0.00	48,493,348.43	48,493,348.43	0.00%
Silangan Savings and Loan Bank, Inc.	0.00	10,342,100.23	10,342,100.23	0.00%
Sterling Bank of Asia Inc.	0.00	1,696,273,590.30	1,696,273,590.30	0.00%
Sun Savings Bank	0.00	73,533,260.75	73,533,260.75	0.00%
The Queen City Development Bank	0.00	673,148,238.43	673,148,238.43	0.00%
The Real Bank (A Thrift Bank) Inc.	0.00	406,449,689.71	406,449,689.71	0.00%
Tong Yang Savings Bank Inc.	0.00	406,849,416.47	406,849,416.47	0.00%
Tower Development Bank	0.00	115,889,336.63	115,889,336.63	0.00%
UCPB Savings Bank	0.00	2,219,668,705.76	2,219,668,705.76	0.00%
United Overseas Bank Philippines	0.00	706,325,774.05	706,325,774.05	0.00%
University Savings Bank	0.00	209,250,986.29	209,250,986.29	0.00%
Village SLA, Inc.	0.00	71,806,327.58	71,806,327.58	0.00%
World Partners Bank (A Thrift Bank)	0.00	159,152,523.60	159,152,523.60	0.00%
Grand Total	807,943,504.60	83,045,575,804.97	82,237,632,300.37	0.97%

Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In PHP
September 30, 2012
Bank	Unbooked Losses	RE	Adjusted RE	Impact on RE
Bataan Development Bank	12,121,205.73	6,233,351.72	-5,887,854.01	194.46%
Planters Development Bank	617,205,016.53	2,251,768,609.03	1,634,563,592.50	27.41%
Wealth Bank - A Development Bank	6,486,091.49	58,292,811.57	51,806,720.08	11.13%
Farmers Savings & Loan Bank	2,080.83	31,002,310.97	31,000,230.14	0.01%
Security Bank Savings Corporation	1,451,702.38	-564,714,698.82	-566,166,401.20	-0.26%
Citibank Savings Inc.	165,122,557.37	-2,373,358,812.86	-2,538,481,370.23	-6.96%
Card SME Bank Inc. (A Thrift Bank)	5,554,850.27	-36,186,335.58	-41,741,185.85	-15.35%
Grand Total	807,943,504.60	-626,962,763.97	-1,434,906,268.57	-128.87%

Source: www.bsp.gov.ph

Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012

Last July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged banks, particularly Universal and Commercial 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, only five banks have the Stockholders Equity (SE) to absorb these Deferred Charges:

1. United Coconut Planters Bank (Deferred Charges of 50.77% of SE)
2. Philippine Bank of Communications (Deferred Charges of 45.99% of SE)
3. Bank of Commerce (Deferred Charges of 5.82% of SE)
4. Rizal Commercial Banking Corporation (Deferred Charges of 3.82% of SE)
5. Banco De Oro Unibank, Inc. (Deferred Charges of 0.16% of SE)

It must be noted that three of these banks are considered borderline insolvent (highlighted in yellow): United Coconut Planters Bank, Philippine Bank of Communications, Bank of Commerce. For more information on distressed banks, please see the previous blog post: "Philippine U/KBs Improve in the 3rd Qtr. of 2012".

For two of the banks, booking their Deferred Charges immediately will only serve to impair 25% or more of their Stockholders Equity:

1. United Coconut Planters Bank (Deferred Charges of 50.77% of SE)
2. Philippine Bank of Communications (Deferred Charges of 45.99% of SE)

Naturally, these banks are considered distressed.

Retained Earnings

Only two banks have sufficient Retained Earnings (RE) to absorb their unbooked losses:

1. Rizal Commercial Banking Corporation (Deferred Charges of 15.59% of RE)
2. Banco de Oro Unibank Inc. (Deferred Charges of 0.81% of RE)

For one of the banks, Deferred Charges will exceed their Retained Earnings:

1. United Coconut Planters Bank (Deferred Charges of 416.14% of RE)

Two of the banks with substantial 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 3.618 billion vs. Deferred Charges of PhP 1.043 billion)
2. Philippine Bank of Communications (Retained Earnings of - PhP 4.774 billion vs. Deferred Charges of PhP 3.717 billion)

For more information of these Deferred Charges, please consult four previous blog posts: "Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - June 30, 2012", "Can Philippine Commercial Banks Charge their Unbooked Losses Against Retained Earnings?", "Philippine Commercial Banks with Overstated Capital as of December 31, 2011" and "BSP's Ampaw Accounting System".

Philippine Universal and Commercial Banking System
Unbooked Losses and Deferred Charges Not Yet Written Down
Impact on Stockholders Equity
In PhP
September 30, 2012
Bank	Unbooked Losses	SE	Adjusted SE	Impact on SE
United Coconut Planters Bank	9,841,900,553.53	19,385,897,395	9,543,996,841.67	50.77%
Philippine Bank of Communications	3,717,471,419.13	8,083,690,578	4,366,219,158.41	45.99%
Bank of Commerce	1,042,813,609.20	17,911,548,955	16,868,735,345.50	5.82%
Rizal Commercial Banking Corporation	1,616,010,396.76	42,302,372,460	40,686,362,063.59	3.82%
Banco De Oro Unibank	234,120,483.13	150,450,853,758	150,216,733,275.22	0.16%
Al-Amanah Islamic Bank of the Philippines	0.00	472,674,446	472,674,445.80	0.00%
Allied Banking Corporation	0.00	18,726,766,267	18,726,766,266.55	0.00%
ANZ Banking Group Ltd	0.00	2,373,395,839	2,373,395,838.64	0.00%
Asia United Bank Corporation	0.00	11,028,570,176	11,028,570,176.41	0.00%
Bangkok Bank Public Co. Ltd	0.00	1,167,640,035	1,167,640,035.38	0.00%
Bank of America N.A.	0.00	596,946,705	596,946,705.20	0.00%
Bank of China Limited - Manila Branch	0.00	584,988,741	584,988,741.14	0.00%
Bank of the Philippine Islands	0.00	91,739,651,562	91,739,651,562.11	0.00%
BDO Private Bank, Inc.	0.00	5,098,086,069	5,098,086,068.85	0.00%
China Banking Corporation	0.00	37,882,503,414	37,882,503,413.76	0.00%
Chinatrust (Philippines) Commercial Banking Corporation	0.00	6,234,024,774	6,234,024,773.66	0.00%
Citibank N.A.	0.00	7,812,821,024	7,812,821,024.26	0.00%
Deutsche Bank AG	0.00	1,863,242,321	1,863,242,321.48	0.00%
Development Bank of the Philippines	0.00	40,856,299,162	40,856,299,161.53	0.00%
East West Banking Corporation	0.00	16,481,579,328	16,481,579,327.51	0.00%
HongKong & Shanghai Banking Corporation	0.00	5,438,663,639	5,438,663,638.78	0.00%
Internationale Nederlanden Groep BK	0.00	2,876,741,574	2,876,741,573.59	0.00%
JP Morgan Chase National Bank Association	0.00	1,863,792,565	1,863,792,565.08	0.00%
Korea Exchange Bank	0.00	595,597,134	595,597,134.03	0.00%
Land Bank of the Philippines	0.00	73,036,897,213	73,036,897,212.95	0.00%
Maybank Philippines Inc.	0.00	5,664,922,891	5,664,922,891.06	0.00%
Mega International Commercial Bank Company Limited	0.00	779,565,356	779,565,356.08	0.00%
Metropolitan Bank & Trust Company	0.00	109,337,191,786	109,337,191,786.37	0.00%
Mizuho Corporate Bank Ltd. - Manila Branch	0.00	1,337,545,845	1,337,545,845.20	0.00%
Philippine National Bank	0.00	30,067,965,289	30,067,965,288.93	0.00%
Philippine Trust Company	0.00	16,338,935,062	16,338,935,061.56	0.00%
Philippine Veterans Bank	0.00	5,722,007,670	5,722,007,669.64	0.00%
Robinsons Bank Corporation	0.00	5,657,648,524	5,657,648,524.35	0.00%
Security Bank Corporation	0.00	36,040,386,614	36,040,386,613.64	0.00%
Standard Chartered Bank	0.00	1,595,531,721	1,595,531,720.80	0.00%
The Bank of Tokyo - Mitsubishi UFJ Ltd	0.00	716,591,348	716,591,348.46	0.00%
Union Bank of the Philippines	0.00	42,897,511,544	42,897,511,543.95	0.00%
Grand Total	16,452,316,461.75	821,021,048,782.89	804,568,732,321.14	2.00%

Philippine Universal and Commercial Banking System
Unbooked Losses and Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In PhP
September 30, 2012
Bank	Unbooked Losses	Retained Earnings	Adjusted RE	Impact on RE
United Coconut Planters Bank	9,841,900,553.53	2,365,040,659	-7,476,859,894.20	416.14%
Rizal Commercial Banking Corporation	1,616,010,396.76	10,365,692,547	8,749,682,150.59	15.59%
Banco De Oro Unibank	234,120,483.13	28,896,008,076	28,661,887,592.79	0.81%
Bank of Commerce	1,042,813,609.20	-3,618,391,126	-4,661,204,735.65	-28.82%
Philippine Bank of Communications	3,717,471,419.13	-4,774,481,497	-8,491,952,916.31	-77.86%
Grand Total	16,452,316,461.75	33,233,868,658.97	16,781,552,197.22	49.50%

Source: www.bsp.gov.ph