Among Listed Philippine Banks, PNB Takes the Silver in Insolvency - December 31, 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 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

Editor's Note: This is an update of an earlier post: "Among Listed Philippine Banks, PNB Takes the Silver in Insolvency - September 30, 2012" dated November 26, 2012.

Based on the individual Published Statements of Condition for Listed Philippine Banks, the Total Distressed Assets increased by Php 6.447 billion or 1.73% from September 30, 2012 to December 31, 2012.  This was offset by an increase of Php 26.397  billion  or 4.32% 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 decreased by 1.52% from 61.07% as of September 30, 2012 to 59.55% as of December 31, 2012.

Please note that the ratio of Distressed Assets to Total Capital Cushion of two banks on this list is above the borderline level of 100.00%.  These banks have been classified as distressed and are highlighted in yellow.  These banks are as follows:

1. China Bank Savings, Inc. has a borderline insolvency ratio of 240.64% as of December 31, 2012, up a very significant 55.11% from 185.52% as of September 30, 2012.  Although China Bank Savings, Inc. is not listed, its parent, China Banking Corporation, is.
2. Philippine National Bank (PNB) has a borderline insolvency ratio of 139.26% as of December 31, 2012, down 17.03% from 156.29% as of September 30, 2012.

It should be noted that the completed merger of PNB, and Allied Bank will be a credit positive for PNB, which has the worst credit rating among the three banks concerned in the merger.  (See: "Moody’s says merger to improve PNB rating").

The Published Statement of Condition of Philippine Bank of Communications (PBCom) was not availabe for the period ending December 31, 2012.

The banks that had significant increases in their distressed asset ratios for the quarterly period ending December 31, 2012 were:

1. East West Banking Corporation, whose distressed ratio increased from 48.36% as of September 30, 2012 to 69.17% as of December 31, 2012.
2. China Bank Savings, Inc., whose distressed ratio increased from 185.52% as of September 30, 2012 to 240.64% as of December 31, 2012.

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
September 30, 2012 to December 31, 2012
Bank	September 30, 2012	December 31, 2012	Variance	% Variance
East West Banking Corporation	48.36%	69.17%	20.81%	43.03%
China Bank Savings, Inc.	185.52%	240.64%	55.11%	29.71%
CityState Savings Bank	38.57%	44.00%	5.43%	14.09%
Philippine Savings Bank	88.92%	101.17%	12.25%	13.78%
Security Bank Corporation	24.36%	26.80%	2.44%	10.01%
Bank of the Philippine Islands	50.40%	55.07%	4.67%	9.26%
Rizal Commercial Banking Corporation	68.77%	74.25%	5.47%	7.96%
Philippine Trust Company	49.11%	48.03%	-1.07%	-2.19%
Banco de Oro Unibank	48.21%	46.43%	-1.79%	-3.71%
Allied Banking Corporation	64.41%	61.43%	-2.98%	-4.63%
Philippine National Bank	156.29%	139.26%	-17.03%	-10.89%
Metropolitan Bank & Trust Company	58.94%	51.59%	-7.35%	-12.48%
Union Bank of the Philippines	87.48%	76.56%	-10.92%	-12.48%
China Banking Corporation	53.38%	44.11%	-9.27%	-17.36%
Grand Total	61.07%	59.55%	-1.52%	-2.49%

Listed Philippine Banks
Total Distressed Assets/Total Capital Cushion
September 30, 2012 to December 31, 2012
	September 30, 2012				December 31, 2012				Variance				% Variance
	Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion		Total Distressed Assets	Total Capital Cushion	Distressed Assets/Total Capital Cushion
Bank	(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)		(In PhP)	(In PhP)	(In %)
China Bank Savings, Inc.	1,898,277,021.68	1,023,197,782.14	185.52%		2,193,496,131.15	911,544,737.69	240.64%		295,219,109.47	-111,653,044.45	55.11%		15.55%	-10.91%	29.71%
Philippine National Bank	50,799,838,940.95	32,504,359,516.71	156.29%		50,766,564,045.82	36,454,637,515.91	139.26%		-33,274,895.13	3,950,277,999.20	-17.03%		-0.07%	12.15%	-10.89%
Philippine Savings Bank	14,692,734,483.48	16,524,087,878.48	88.92%		16,254,121,220.71	16,065,835,469.57	101.17%		1,561,386,737.23	-458,252,408.91	12.25%		10.63%	-2.77%	13.78%
Union Bank of the Philippines	38,394,556,414.93	43,887,492,186.78	87.48%		40,003,600,777.57	52,249,323,368.84	76.56%		1,609,044,362.64	8,361,831,182.06	-10.92%		4.19%	19.05%	-12.48%
Rizal Commercial Banking Corporation	25,702,007,474.49	37,372,568,399.29	68.77%		26,931,182,478.09	36,272,524,028.33	74.25%		1,229,175,003.60	-1,100,044,370.96	5.47%		4.78%	-2.94%	7.96%
East West Banking Corporation	8,837,712,599.78	18,274,068,390.58	48.36%		12,241,660,915.00	17,697,163,565.41	69.17%		3,403,948,315.22	-576,904,825.17	20.81%		38.52%	-3.16%	43.03%
Allied Banking Corporation	13,279,854,327.10	20,618,612,108.27	64.41%		13,226,664,523.39	21,532,539,291.61	61.43%		-53,189,803.71	913,927,183.34	-2.98%		-0.40%	4.43%	-4.63%
Bank of the Philippine Islands	43,970,127,078.00	87,241,945,395.00	50.40%		46,085,756,663.00	83,688,934,943.00	55.07%		2,115,629,585.00	-3,553,010,452.00	4.67%		4.81%	-4.07%	9.26%
Metropolitan Bank & Trust Company	58,589,388,144.26	99,399,052,866.07	58.94%		59,066,123,023.34	114,491,444,450.66	51.59%		476,734,879.08	15,092,391,584.59	-7.35%		0.81%	15.18%	-12.48%
Philippine Trust Company	8,158,501,407.67	16,613,937,357.88	49.11%		7,993,333,168.52	16,641,374,510.58	48.03%		-165,168,239.15	27,437,152.70	-1.07%		-2.02%	0.17%	-2.19%
Banco de Oro Unibank	79,441,752,672.48	164,765,851,685.01	48.21%		76,233,226,086.74	164,200,302,494.77	46.43%		-3,208,526,585.74	-565,549,190.24	-1.79%		-4.04%	-0.34%	-3.71%
China Banking Corporation	21,113,412,180.64	39,555,560,128.40	53.38%		19,660,385,488.71	44,573,150,968.01	44.11%		-1,453,026,691.93	5,017,590,839.61	-9.27%		-6.88%	12.68%	-17.36%
CityState Savings Bank	311,081,927.08	806,533,911.73	38.57%		355,639,804.32	808,185,795.23	44.00%		44,557,877.24	1,651,883.50	5.43%		14.32%	0.20%	14.09%
Security Bank Corporation	7,848,582,981.88	32,217,229,745.77	24.36%		8,472,633,153.76	31,614,925,250.60	26.80%		624,050,171.88	-602,304,495.17	2.44%		7.95%	-1.87%	10.01%
Grand Total	373,037,827,654.42	610,804,497,352.11	61.07%		379,484,387,480.12	637,201,886,390.21	59.55%		6,446,559,825.70	26,397,389,038.10	-1.52%		1.73%	4.32%	-2.49%

Source: www.bsp.gov.ph and www.pse.com.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 and December 31, 2012 as published in the BSP website (www.bsp.gov.ph) or the Philippine Stock Exchange website (www.pse.com.ph) or the individual bank's own website. 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.