In an April 9, 2012 article entitled "Stress Test Proves Strength of PH Banks", "Philippine banks are seen to survive a disaster in which the various lenders are forced to write off loans as large as PhP 36 billion without asking shareholders, the central bank, or the national government for bailout money." This assertion stems from a recent stress test conducted by the Bangko Sentral ng Pilipinas (BSP) on all 55 regular and commercial and expanded license banks.
For Philippine Commercial Banks, these NPLs currently comprise PhP 69.611 billion or 8.48% of the PhP 821.021 billion in Stockholders Equity (SE) as of September 30, 2012. So, writing off 50% of the Philippine Commercial Banking NPLs would reduce their aggregate stockholders equity by a little more than 4%.
For Philippine Thrift Banks, the NPL levels are much higher on a relative basis. As of September 30, 2012, Philippine Thrift Bank NPLs amounted to PhP 23.800 billion or 28.66% of the PhP 83.046 billion of Stockholders Equity of the Philippine Thrift Banking System for the same period. This is more than three times the level of the Philippine Commercial Banking System. As a consequence, Philippine Thrift Banks, as a whole, are much more vulnerable to a 50% NPL write-off, simply because the NPL levels are so much higher than that of Philippine Commercial Banks.
In a 50% write-off of NPLs would reduce the Stockholders Equity of Philippine Thrift Banks by around 14%. Naturally, some banks would be more affected than others. (Weak banks are highlighted in yellow).
One bank's equity, The Real Bank, would be completely wiped out. Two other banks, Silangan Savings and Loan Bank, Inc. and Citibank Savings Inc. would experience a near wipe-out of their respective stockholders equity. Citibank Savings Inc. is the local subsidiary of a foreign bank and, as such, has little or no capital. In a crisis, it would rely on its "home-host" arrangement wherein the mother ship (the foreign parent) sends more funds and/or capital when local regulators or counterparties require it. Three other banks, namely, Security Bank Savings Corporation (38.83% decline in SE), Planters Development Bank (34.55% decline in SE) and Bataan Development Bank (34.29% decline in SE), would be severely affected.
| Philippine Thrift Banking System | |||
| NPL as % of SE | |||
| September 30, 2012 | |||
| NPL | SE | NPL/SE | |
| Bank | (In Php) | (In Php) | (In %) |
| The Real Bank (A Thrift Bank) Inc. | 3,089,404,132.56 | 406,449,689.71 | 760.10% |
| Silangan Savings and Loan Bank, Inc. | 19,784,753.99 | 10,342,100.23 | 191.30% |
| Citibank Savings Inc. | 2,771,555,428.72 | 1,817,029,562.88 | 152.53% |
| Security Bank Savings Corporation | 571,601,598.82 | 736,065,900.73 | 77.66% |
| Planters Development Bank | 2,711,873,513.54 | 3,924,090,032.92 | 69.11% |
| Bataan Development Bank | 46,353,003.59 | 67,597,577.61 | 68.57% |
| Legazpi Savings Bank Inc. | 100,954,216.42 | 181,260,590.59 | 55.70% |
| Comsavings Bank | 190,618,087.35 | 352,249,570.43 | 54.11% |
| Luzon Development Bank | 219,475,516.72 | 406,399,302.47 | 54.00% |
| Opportunity Kauswagan Bank, Inc. | 47,684,373.36 | 94,831,661.78 | 50.28% |
| Farmers Savings & Loan Bank | 51,174,135.56 | 102,604,061.96 | 49.88% |
| Philippine Postal Savings Bank | 348,931,208.42 | 704,043,495.18 | 49.56% |
| Sterling Bank of Asia Inc. | 781,158,008.07 | 1,696,273,590.30 | 46.05% |
| Pampanga Development Bank | 45,168,132.43 | 107,312,295.20 | 42.09% |
| Village SLA, Inc. | 27,991,023.47 | 71,806,327.58 | 38.98% |
| Allied Savings Bank | 339,137,105.98 | 956,183,719.07 | 35.47% |
| Malasiqui Progressive SLB, Inc. | 17,755,918.15 | 50,112,079.58 | 35.43% |
| Metro Cebu Public Savings Bank | 21,756,082.32 | 65,801,135.23 | 33.06% |
| Sampaguita SLA | 15,760,176.09 | 48,493,348.43 | 32.50% |
| Philippine Savings Bank | 4,371,709,846.20 | 13,537,819,146.69 | 32.29% |
| Malayan Bank Savings & Mortgage Bank | 289,584,507.49 | 1,030,272,614.97 | 28.11% |
| Tong Yang Savings Bank Inc. | 108,770,025.35 | 406,849,416.47 | 26.73% |
| Penbank, Inc. | 69,241,199.63 | 261,521,790.11 | 26.48% |
| BPI Direct Savings Bank | 186,059,098.41 | 739,167,639.63 | 25.17% |
| Iloilo City Development Bank | 16,204,747.47 | 64,575,154.89 | 25.09% |
| University Savings Bank | 52,110,978.33 | 209,250,986.29 | 24.90% |
| First Consolidated Bank | 426,729,100.18 | 1,740,308,076.63 | 24.52% |
| Producers Savings Bank | 166,242,041.59 | 720,392,659.44 | 23.08% |
| Equicom SB | 105,817,165.94 | 463,045,239.53 | 22.85% |
| BPI Family Savings Bank | 3,401,887,439.01 | 15,292,851,941.12 | 22.24% |
| World Partners Bank (A Thrift Bank) | 35,116,346.27 | 159,152,523.60 | 22.06% |
| Cordillera Savings Bank | 21,484,504.10 | 99,908,118.27 | 21.50% |
| Hiyas Savings & Loan Bank | 34,167,307.18 | 159,176,956.30 | 21.46% |
| Lemery Savings & Loan Bank, Inc. | 14,996,053.04 | 70,264,263.50 | 21.34% |
| RCBC Savings Bank | 1,422,235,155.07 | 7,166,281,446.81 | 19.85% |
| Wealth Bank - A Development Bank | 69,207,906.04 | 369,496,704.40 | 18.73% |
| Dungganon Bank | 11,530,367.97 | 64,495,286.01 | 17.88% |
| Philippine Business Bank | 758,484,691.89 | 4,371,356,169.80 | 17.35% |
| Maritime SLA | 11,152,304.30 | 66,102,437.80 | 16.87% |
| Quezon Coconut Producers SLB Inc. | 9,563,924.35 | 56,890,460.69 | 16.81% |
| Business & Consumers Bank | 13,211,581.05 | 80,158,164.99 | 16.48% |
| BPI Globe Banko Inc. Savings Bank | 54,469,863.14 | 349,094,796.54 | 15.60% |
| Pridestar Development Bank | 9,106,451.30 | 67,592,604.71 | 13.47% |
| Pacific Ace Savings Bank | 8,901,627.53 | 73,164,054.62 | 12.17% |
| UCPB Savings Bank | 208,291,943.00 | 2,219,668,705.76 | 9.38% |
| Dumaguete City Development Bank | 18,543,550.99 | 210,023,861.68 | 8.83% |
| City Savings Bank | 185,387,596.40 | 2,103,900,942.28 | 8.81% |
| Northpoint Development Bank | 6,891,037.28 | 78,747,771.22 | 8.75% |
| China Bank Savings | 83,429,368.24 | 1,109,583,840.73 | 7.52% |
| Sun Savings Bank | 5,276,108.19 | 73,533,260.75 | 7.18% |
| Card SME Bank Inc. (A Thrift Bank) | 11,415,807.43 | 184,615,481.92 | 6.18% |
| Tower Development Bank | 4,940,073.64 | 115,889,336.63 | 4.26% |
| CityState Savings Bank | 30,667,454.51 | 782,398,842.10 | 3.92% |
| Bataan SLA | 2,783,653.43 | 74,116,683.86 | 3.76% |
| Bank One Savings and Trust Corp. | 19,390,888.26 | 523,078,931.29 | 3.71% |
| The Queen City Development Bank | 23,049,328.42 | 673,148,238.43 | 3.42% |
| HSBC Savings Bank (Phils) Inc. | 86,920,286.66 | 3,068,645,532.31 | 2.83% |
| Life Savings Bank | 1,737,746.67 | 63,720,809.87 | 2.73% |
| Optimum Development Bank | 16,269,278.12 | 674,499,273.91 | 2.41% |
| Microfinance Maximum SB (Maxbank) | 1,193,170.18 | 62,487,046.42 | 1.91% |
| Progress SLA | 1,329,679.84 | 83,884,449.90 | 1.59% |
| Century Savings Bank | 5,570,603.90 | 893,351,154.16 | 0.62% |
| Merchants Savings & Loan Association Inc. | 430,478.95 | 6,502,899,210.43 | 0.01% |
| BDO Elite Savings Bank | 0.00 | 1,539,407,664.50 | 0.00% |
| Isla Bank (A Thrift Bank) Inc. | 0.00 | 632,239,119.74 | 0.00% |
| Philippine Resources Savings Banking Corporation | 0.00 | 1,251,275,177.34 | 0.00% |
| United Overseas Bank Philippines | 0.00 | 706,325,774.05 | 0.00% |
| Grand Total | 23,799,638,702.50 | 83,045,575,804.97 | 28.66% |
Source: www.bsp.gov.ph
Are NPLs the Right Numbers to Look At?
In a financial crisis, a loan that is current can very well become past due, and a past due loan can become a non-performing loan, and a non-performing loan can become a loan write-off. The real number to look at are the loans that the banks and BSP already consider doubtful: Classified Loans.
Investopedia.com defines "Classified Loans" as:
"Any bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. Banks usually categorize such loans as adversely classified assets on their books."
The US Federal Deposit Insurance Corporation (FDIC), similar to our very own Philippine Deposit Insurance Corporation (PDIC), defines Classified Loans as:
"Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future."
In Circular #0247 dated May 19, 2000, BSP defines Classified Loans as loans which possess the following characteristics:
- Loans especially mentioned because they have potential weaknesses that deserve Management's close attention;
- Substandard Loans are loans which appear to involve a substantial and unreasonable degree of risk to the institution because of unfavorable record or unsatisfactory characteristics;
- Doubtful Loans are Substandard Loans with the added characteristics that existing facts, conditions, and values make collection or liquidation in full highly improbable and in which substantial loss is probable;
- Loss are loans that are considered uncollectible or worthless and are of such little value that their continuance as bankable assets is not warranted although the loans may have some recovery or salvage value.
- Loans Especially Mentioned: 5%
- Substandard - Secured: 6% - 25%
- Substandard - Unsecured: 25%
- Doubtful: 50%
- Loss: 100%
| Philippine Thrift Banking System | |||
| Classified Loans vs. NPLs | |||
| September 30, 2012 | |||
| Classified Loans | NPLs | Classified Loans/NPLs | |
| Bank | (In Php) | (In Php) | (In %) |
| China Bank Savings | 1,454,633,433.43 | 83,429,368.24 | 1743.55% |
| Village SLA, Inc. | 445,604,460.12 | 27,991,023.47 | 1591.95% |
| Iloilo City Development Bank | 257,194,670.11 | 16,204,747.47 | 1587.16% |
| Bank One Savings and Trust Corp. | 212,138,095.35 | 19,390,888.26 | 1094.01% |
| Dumaguete City Development Bank | 169,540,000.00 | 18,543,550.99 | 914.28% |
| Life Savings Bank | 15,425,746.58 | 1,737,746.67 | 887.69% |
| Century Savings Bank | 42,249,723.90 | 5,570,603.90 | 758.44% |
| RCBC Savings Bank | 9,577,290,000.00 | 1,422,235,155.07 | 673.40% |
| Comsavings Bank | 1,275,897,789.57 | 190,618,087.35 | 669.35% |
| Tower Development Bank | 32,674,490.06 | 4,940,073.64 | 661.42% |
| Business & Consumers Bank | 83,451,672.30 | 13,211,581.05 | 631.66% |
| University Savings Bank | 294,419,242.55 | 52,110,978.33 | 564.99% |
| BPI Globe Banko Inc. Savings Bank | 289,053,196.48 | 54,469,863.14 | 530.67% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 100,954,216.42 | 514.07% |
| UCPB Savings Bank | 864,325,257.51 | 208,291,943.00 | 414.96% |
| CityState Savings Bank | 109,440,387.31 | 30,667,454.51 | 356.86% |
| The Queen City Development Bank | 74,464,177.14 | 23,049,328.42 | 323.06% |
| Equicom SB | 308,726,531.88 | 105,817,165.94 | 291.75% |
| Progress SLA | 3,593,589.40 | 1,329,679.84 | 270.26% |
| The Real Bank (A Thrift Bank) Inc. | 7,810,863,011.63 | 3,089,404,132.56 | 252.83% |
| Philippine Savings Bank | 10,972,086,654.47 | 4,371,709,846.20 | 250.98% |
| Farmers Savings & Loan Bank | 125,071,527.18 | 51,174,135.56 | 244.40% |
| Malayan Bank Savings & Mortgage Bank | 702,086,113.75 | 289,584,507.49 | 242.45% |
| Bataan Development Bank | 102,400,000.00 | 46,353,003.59 | 220.91% |
| Cordillera Savings Bank | 46,658,316.65 | 21,484,504.10 | 217.17% |
| Penbank, Inc. | 149,002,555.43 | 69,241,199.63 | 215.19% |
| Sampaguita SLA | 33,770,458.09 | 15,760,176.09 | 214.28% |
| Planters Development Bank | 5,766,494,221.98 | 2,711,873,513.54 | 212.64% |
| Tong Yang Savings Bank Inc. | 227,192,897.96 | 108,770,025.35 | 208.87% |
| BPI Family Savings Bank | 6,929,894,886.68 | 3,401,887,439.01 | 203.71% |
| Producers Savings Bank | 329,252,220.59 | 166,242,041.59 | 198.06% |
| Merchants Savings & Loan Association Inc. | 795,000.00 | 430,478.95 | 184.68% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 47,684,373.36 | 180.06% |
| Metro Cebu Public Savings Bank | 38,394,813.96 | 21,756,082.32 | 176.48% |
| Philippine Postal Savings Bank | 597,851,914.66 | 348,931,208.42 | 171.34% |
| Maritime SLA | 18,551,268.51 | 11,152,304.30 | 166.34% |
| Quezon Coconut Producers SLB Inc. | 15,704,554.47 | 9,563,924.35 | 164.21% |
| Philippine Business Bank | 1,184,818,220.39 | 758,484,691.89 | 156.21% |
| Security Bank Savings Corporation | 783,034,313.24 | 571,601,598.82 | 136.99% |
| City Savings Bank | 216,659,328.06 | 185,387,596.40 | 116.87% |
| HSBC Savings Bank (Phils) Inc. | 101,311,055.49 | 86,920,286.66 | 116.56% |
| BPI Direct Savings Bank | 200,707,824.41 | 186,059,098.41 | 107.87% |
| First Consolidated Bank | 454,426,990.76 | 426,729,100.18 | 106.49% |
| Citibank Savings Inc. | 2,949,376,247.16 | 2,771,555,428.72 | 106.42% |
| Dungganon Bank | 12,175,392.51 | 11,530,367.97 | 105.59% |
| Allied Savings Bank | 356,203,769.02 | 339,137,105.98 | 105.03% |
| Lemery Savings & Loan Bank, Inc. | 15,016,699.12 | 14,996,053.04 | 100.14% |
| Bataan SLA | 2,783,653.43 | 2,783,653.43 | 100.00% |
| Hiyas Savings & Loan Bank | 34,167,307.18 | 34,167,307.18 | 100.00% |
| Malasiqui Progressive SLB, Inc. | 17,755,918.15 | 17,755,918.15 | 100.00% |
| Optimum Development Bank | 16,269,278.12 | 16,269,278.12 | 100.00% |
| Sun Savings Bank | 5,276,108.19 | 5,276,108.19 | 100.00% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 781,158,008.07 | 97.19% |
| Luzon Development Bank | 207,273,406.13 | 219,475,516.72 | 94.44% |
| Pampanga Development Bank | 41,660,931.67 | 45,168,132.43 | 92.24% |
| Silangan Savings and Loan Bank, Inc. | 17,852,624.58 | 19,784,753.99 | 90.23% |
| Wealth Bank - A Development Bank | 44,087,172.44 | 69,207,906.04 | 63.70% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 11,415,807.43 | 0.00% |
| Microfinance Maximum SB (Maxbank) | 0.00 | 1,193,170.18 | 0.00% |
| Northpoint Development Bank | 0.00 | 6,891,037.28 | 0.00% |
| Pacific Ace Savings Bank | 0.00 | 8,901,627.53 | 0.00% |
| Pridestar Development Bank | 0.00 | 9,106,451.30 | 0.00% |
| World Partners Bank (A Thrift Bank) | 0.00 | 35,116,346.27 | 0.00% |
| BDO Elite Savings Bank | 0.00 | 0.00 | NA |
| Isla Bank (A Thrift Bank) Inc. | 35,287,750.04 | 0.00 | NA |
| Philippine Resources Savings Banking Corporation | 621,328,017.45 | 0.00 | NA |
| United Overseas Bank Philippines | 867,269,011.62 | 0.00 | NA |
| Grand Total | 58,925,000,678.78 | 23,799,638,702.50 | 247.59% |
Source: www.bsp.gov.ph
This level of classified loans should be measured against the bank's "capital cushion" or its ability to absorb losses. Capital Cushion is normally defined as a bank's "Tangible Common Equity" plus its Loan Loss Reserves. Tangible Common Equity (TCE) refers to the subset of shareholders' equity that is not preferred equity and not intangible assets. So it excludes such items as Hybrid equity (like preferred shares) and goodwill.
By this measure, the level of "Classified Loans and other Risky Assets" amounts to 63.61% of the PhP 92.629 billion in Total Capital Cushion of Philippine Thrift Banks as of September 30, 2012.
| Philippine Thrift Banking System | |||
| Classified Loans as % of Total Capital Cushion | |||
| September 30, 2012 | |||
| Classified Loans | Total Capital Cushion | Classified Loans/Total Capital Cushion | |
| Bank | (In Php) | (In Php) | (In %) |
| The Real Bank (A Thrift Bank) Inc. | 7,810,863,011.63 | 905,196,918.56 | 862.89% |
| Village SLA, Inc. | 445,604,460.12 | 85,016,613.24 | 524.14% |
| Iloilo City Development Bank | 257,194,670.11 | 66,264,793.70 | 388.13% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 192,381,540.63 | 269.76% |
| Comsavings Bank | 1,275,897,789.57 | 473,592,378.81 | 269.41% |
| China Bank Savings | 1,454,633,433.43 | 1,022,928,082.14 | 142.20% |
| RCBC Savings Bank | 9,577,290,000.00 | 7,221,683,741.37 | 132.62% |
| Bataan Development Bank | 102,400,000.00 | 77,756,277.41 | 131.69% |
| University Savings Bank | 294,419,242.55 | 229,473,016.94 | 128.30% |
| Planters Development Bank | 5,766,494,221.98 | 4,513,127,703.18 | 127.77% |
| Business & Consumers Bank | 83,451,672.30 | 79,127,256.40 | 105.47% |
| Farmers Savings & Loan Bank | 125,071,527.18 | 119,121,673.90 | 104.99% |
| Dumaguete City Development Bank | 169,540,000.00 | 217,277,299.29 | 78.03% |
| Philippine Postal Savings Bank | 597,851,914.66 | 829,916,335.27 | 72.04% |
| Philippine Savings Bank | 10,972,086,654.47 | 16,524,087,878.48 | 66.40% |
| Citibank Savings Inc. | 2,949,376,247.16 | 4,556,756,088.22 | 64.73% |
| Malayan Bank Savings & Mortgage Bank | 702,086,113.75 | 1,151,079,672.82 | 60.99% |
| United Overseas Bank Philippines | 867,269,011.62 | 1,447,649,122.74 | 59.91% |
| Security Bank Savings Corporation | 783,034,313.24 | 1,335,142,276.18 | 58.65% |
| Equicom SB | 308,726,531.88 | 526,505,528.17 | 58.64% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 151,324,998.37 | 56.74% |
| Metro Cebu Public Savings Bank | 38,394,813.96 | 72,847,564.07 | 52.71% |
| Penbank, Inc. | 149,002,555.43 | 286,750,207.57 | 51.96% |
| Producers Savings Bank | 329,252,220.59 | 649,839,788.62 | 50.67% |
| Tong Yang Savings Bank Inc. | 227,192,897.96 | 464,599,551.99 | 48.90% |
| BPI Globe Banko Inc. Savings Bank | 289,053,196.48 | 600,052,047.92 | 48.17% |
| Philippine Resources Savings Banking Corporation | 621,328,017.45 | 1,312,494,388.25 | 47.34% |
| BPI Family Savings Bank | 6,929,894,886.68 | 15,625,229,419.16 | 44.35% |
| Luzon Development Bank | 207,273,406.13 | 467,765,497.15 | 44.31% |
| Cordillera Savings Bank | 46,658,316.65 | 114,956,104.55 | 40.59% |
| Bank One Savings and Trust Corp. | 212,138,095.35 | 522,793,794.10 | 40.58% |
| Sampaguita SLA | 33,770,458.09 | 85,749,472.39 | 39.38% |
| UCPB Savings Bank | 864,325,257.51 | 2,242,683,271.11 | 38.54% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 2,013,529,012.56 | 37.71% |
| Allied Savings Bank | 356,203,769.02 | 1,017,246,565.62 | 35.02% |
| Silangan Savings and Loan Bank, Inc. | 17,852,624.58 | 51,238,430.87 | 34.84% |
| Pampanga Development Bank | 41,660,931.67 | 125,163,058.50 | 33.29% |
| Malasiqui Progressive SLB, Inc. | 17,755,918.15 | 57,540,947.14 | 30.86% |
| Philippine Business Bank | 1,184,818,220.39 | 3,934,592,014.14 | 30.11% |
| Tower Development Bank | 32,674,490.06 | 118,433,563.41 | 27.59% |
| Maritime SLA | 18,551,268.51 | 68,811,839.22 | 26.96% |
| Quezon Coconut Producers SLB Inc. | 15,704,554.47 | 58,300,771.65 | 26.94% |
| BPI Direct Savings Bank | 200,707,824.41 | 766,396,820.94 | 26.19% |
| Life Savings Bank | 15,425,746.58 | 65,456,807.08 | 23.57% |
| First Consolidated Bank | 454,426,990.76 | 1,965,455,035.15 | 23.12% |
| Lemery Savings & Loan Bank, Inc. | 15,016,699.12 | 71,454,318.24 | 21.02% |
| Hiyas Savings & Loan Bank | 34,167,307.18 | 171,907,664.98 | 19.88% |
| Dungganon Bank | 12,175,392.51 | 64,839,980.89 | 18.78% |
| CityState Savings Bank | 109,440,387.31 | 806,533,911.73 | 13.57% |
| The Queen City Development Bank | 74,464,177.14 | 684,680,835.05 | 10.88% |
| City Savings Bank | 216,659,328.06 | 1,992,880,797.04 | 10.87% |
| Wealth Bank - A Development Bank | 44,087,172.44 | 418,457,222.96 | 10.54% |
| Sun Savings Bank | 5,276,108.19 | 77,159,514.33 | 6.84% |
| Isla Bank (A Thrift Bank) Inc. | 35,287,750.04 | 631,893,880.25 | 5.58% |
| Century Savings Bank | 42,249,723.90 | 873,232,215.08 | 4.84% |
| Progress SLA | 3,593,589.40 | 84,769,900.88 | 4.24% |
| Bataan SLA | 2,783,653.43 | 73,936,671.64 | 3.76% |
| HSBC Savings Bank (Phils) Inc. | 101,311,055.49 | 2,877,120,064.23 | 3.52% |
| Optimum Development Bank | 16,269,278.12 | 683,355,419.98 | 2.38% |
| Merchants Savings & Loan Association Inc. | 795,000.00 | 6,522,665,880.14 | 0.01% |
| BDO Elite Savings Bank | 0.00 | 1,507,557,562.16 | 0.00% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 190,550,540.55 | 0.00% |
| Microfinance Maximum SB (Maxbank) | 0.00 | 62,266,587.38 | 0.00% |
| Northpoint Development Bank | 0.00 | 92,372,200.96 | 0.00% |
| Pacific Ace Savings Bank | 0.00 | 75,790,600.32 | 0.00% |
| Pridestar Development Bank | 0.00 | 71,698,825.23 | 0.00% |
| World Partners Bank (A Thrift Bank) | 0.00 | 180,827,639.98 | 0.00% |
| Grand Total | 58,925,000,678.78 | 92,629,287,402.98 | 63.61% |
Source: www.bsp.gov.ph
Stress Test Scenarios
Aggregate
So how will a 10%, 20%, 30%, 40%, and even 50% write-off of Classified Loans affect the Total Capital Cushion of the Philippine Thrift Banking System?
In the aggregate, if Classified Loans amount to 63.61% of the thrift banking system's Total Capital Cushion, then it follows that a 10% write-off of Classified Loans will reduce the total capital by 6.36% and a 50% write-off of classified loans will reduce the thrift banking system's Total Capital Cushion by 31.81%.
Individual Banks
A 10% write-off of Classified Loans would nearly wipe out the Total Capital Cusion of one bank (highlighted in red) and severely impact (by 30% or more) the Total Capital Cushion of two more banks (severely affected banks highlighted in yellow).
- The Real Bank (86.29% reduction in Total Capital Cushion)
- Village SLA, Inc. (52.41% reduction in Total Capital Cushion)
- Iloilo City Development Bank (38.81% reduction in Total Capital Cushion)
A 20% write-off of Classified Loans will totally wipe out the Total Capital Cushion of two banks and severely impact the Total Capital Cushion of three more banks:
- The Real Bank (172.58% reduction in Total Capital Cushion)
- Village SLA, Inc. (104.83% reduction in Total Capital Cushion)
- Iloilo City Development Bank (77.63% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (53.95% reduction in Total Capital Cushion)
- Comsavings Bank (53.88% reduction in Total Capital Cushion)
- The Real Bank (258.87% reduction in Total Capital Cushion)
- Village SLA, Inc. (157.24% reduction in Total Capital Cushion)
- Iloilo City Development Bank (116.44% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (80.93% reduction in Total Capital Cushion)
- Comsavings Bank (80.82% reduction in Total Capital Cushion)
- China Bank Savings (42.66% reduction in Total Capital Cushion)
- RCBC Savings Bank (39.79% reduction in Total Capital Cushion)
- Bataan Development Bank (39.51% reduction in Total Capital Cushion)
- University Savings Bank (39.44% reduction in Total Capital Cushion)
- Planters Development Bank (38.33% reduction in Total Capital Cushion)
- Business & Consumers Bank (31.64% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (32.31% reduction in Total Capital Cushion)
A 40% write-off of Classified Loans will totally wipe out the Total Capital Cushion of five banks and severely affect (reduce by 30% or more) the Total Capital Cushion of eight more banks:
- The Real Bank (345.16% reduction in Total Capital Cushion)
- Village SLA, Inc. (209.66% reduction in Total Capital Cushion)
- Iloilo City Development Bank (155.25% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (107.91% reduction in Total Capital Cushion)
- Comsavings Bank (107.76% reduction in Total Capital Cushion)
- China Bank Savings (56.88% reduction in Total Capital Cushion)
- RCBC Savings Bank (53.05% reduction in Total Capital Cushion)
- Bataan Development Bank (52.68% reduction in Total Capital Cushion)
- University Savings Bank (51.32% reduction in Total Capital Cushion)
- Planters Development Bank (51.11% reduction in Total Capital Cushion)
- Business & Consumers Bank (42.19% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (42.00% reduction in Total Capital Cushion)
- Dumaguete City Development Bank (31.21% reduction in Total Capital Cushion)
A 50% write-off of Classified Loans will totally wipe out the Total Capital Cushion of four banks and severely affect (reduce by 30% or more) the Total Capital Cushion of fourteen more banks:
- The Real Bank (431.45% reduction in Total Capital Cushion)
- Village SLA, Inc. (262.07% reduction in Total Capital Cushion)
- Iloilo City Development Bank (194.07% reduction in Total Capital Cushion)
- Legazpi Savings Bank Inc. (134.88% reduction in Total Capital Cushion)
- Comsavings Bank (134.70% reduction in Total Capital Cushion)
- China Bank Savings (71.10% reduction in Total Capital Cushion)
- RCBC Savings Bank (66.31% reduction in Total Capital Cushion)
- Bataan Development Bank (65.85% reduction in Total Capital Cushion)
- University Savings Bank (64.15% reduction in Total Capital Cushion)
- Planters Development Bank (63.89% reduction in Total Capital Cushion)
- Business & Consumers Bank (52.73% reduction in Total Capital Cushion)
- Farmers Savings & Loan Bank (52.50% reduction in Total Capital Cushion)
- Dumaguete City Development Bank (39.01% reduction in Total Capital Cushion)
- Philippine Postal Savings Bank (36.02% reduction in Total Capital Cushion)
- Philippine Savings Bank (33.20% reduction in Total Capital Cushion)
- Citibank Savings Inc. (32.36% reduction in Total Capital Cushion)
- Malayan Bank Savings & Mortgage Bank (30.50% reduction in Total Capital Cushion)
Please bear in mind that a number of these banks are already very weak and are in distress. See a previous blog post "Philippine Thrift Banks Deteriorate in the 3rd Quarter of 2012". Moreover, their capital can be overstated. See a previous blog post "Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - September 30, 2012". As such, any reduction in their capital cushion could knock down an already weak bank.
| Philippine Thrift Banking System | |||||||
| Classified Loans as % of Total Capital Cushion | |||||||
| September 30, 2012 | |||||||
| Classified Loans | Total Capital Cushion | Impact of 10% Loss on Total Capital Cushion | Impact of 20% Loss on Total Capital Cushion | Impact of 30% Loss on Total Capital Cushion | Impact of 40% Loss on Total Capital Cushion | Impact of 50% Loss on Total Capital Cushion | |
| Bank | (In Php) | (In Php) | (In %) | (In %) | (In %) | (In %) | (In %) |
| The Real Bank (A Thrift Bank) Inc. | 7,810,863,011.63 | 905,196,918.56 | 86.29% | 172.58% | 258.87% | 345.16% | 431.45% |
| Village SLA, Inc. | 445,604,460.12 | 85,016,613.24 | 52.41% | 104.83% | 157.24% | 209.66% | 262.07% |
| Iloilo City Development Bank | 257,194,670.11 | 66,264,793.70 | 38.81% | 77.63% | 116.44% | 155.25% | 194.07% |
| Legazpi Savings Bank Inc. | 518,975,000.00 | 192,381,540.63 | 26.98% | 53.95% | 80.93% | 107.91% | 134.88% |
| Comsavings Bank | 1,275,897,789.57 | 473,592,378.81 | 26.94% | 53.88% | 80.82% | 107.76% | 134.70% |
| China Bank Savings | 1,454,633,433.43 | 1,022,928,082.14 | 14.22% | 28.44% | 42.66% | 56.88% | 71.10% |
| RCBC Savings Bank | 9,577,290,000.00 | 7,221,683,741.37 | 13.26% | 26.52% | 39.79% | 53.05% | 66.31% |
| Bataan Development Bank | 102,400,000.00 | 77,756,277.41 | 13.17% | 26.34% | 39.51% | 52.68% | 65.85% |
| University Savings Bank | 294,419,242.55 | 229,473,016.94 | 12.83% | 25.66% | 38.49% | 51.32% | 64.15% |
| Planters Development Bank | 5,766,494,221.98 | 4,513,127,703.18 | 12.78% | 25.55% | 38.33% | 51.11% | 63.89% |
| Business & Consumers Bank | 83,451,672.30 | 79,127,256.40 | 10.55% | 21.09% | 31.64% | 42.19% | 52.73% |
| Farmers Savings & Loan Bank | 125,071,527.18 | 119,121,673.90 | 10.50% | 21.00% | 31.50% | 42.00% | 52.50% |
| Dumaguete City Development Bank | 169,540,000.00 | 217,277,299.29 | 7.80% | 15.61% | 23.41% | 31.21% | 39.01% |
| Philippine Postal Savings Bank | 597,851,914.66 | 829,916,335.27 | 7.20% | 14.41% | 21.61% | 28.82% | 36.02% |
| Philippine Savings Bank | 10,972,086,654.47 | 16,524,087,878.48 | 6.64% | 13.28% | 19.92% | 26.56% | 33.20% |
| Citibank Savings Inc. | 2,949,376,247.16 | 4,556,756,088.22 | 6.47% | 12.95% | 19.42% | 25.89% | 32.36% |
| Malayan Bank Savings & Mortgage Bank | 702,086,113.75 | 1,151,079,672.82 | 6.10% | 12.20% | 18.30% | 24.40% | 30.50% |
| United Overseas Bank Philippines | 867,269,011.62 | 1,447,649,122.74 | 5.99% | 11.98% | 17.97% | 23.96% | 29.95% |
| Security Bank Savings Corporation | 783,034,313.24 | 1,335,142,276.18 | 5.86% | 11.73% | 17.59% | 23.46% | 29.32% |
| Equicom SB | 308,726,531.88 | 526,505,528.17 | 5.86% | 11.73% | 17.59% | 23.45% | 29.32% |
| Opportunity Kauswagan Bank, Inc. | 85,861,246.92 | 151,324,998.37 | 5.67% | 11.35% | 17.02% | 22.70% | 28.37% |
| Metro Cebu Public Savings Bank | 38,394,813.96 | 72,847,564.07 | 5.27% | 10.54% | 15.81% | 21.08% | 26.35% |
| Penbank, Inc. | 149,002,555.43 | 286,750,207.57 | 5.20% | 10.39% | 15.59% | 20.78% | 25.98% |
| Producers Savings Bank | 329,252,220.59 | 649,839,788.62 | 5.07% | 10.13% | 15.20% | 20.27% | 25.33% |
| Tong Yang Savings Bank Inc. | 227,192,897.96 | 464,599,551.99 | 4.89% | 9.78% | 14.67% | 19.56% | 24.45% |
| BPI Globe Banko Inc. Savings Bank | 289,053,196.48 | 600,052,047.92 | 4.82% | 9.63% | 14.45% | 19.27% | 24.09% |
| Philippine Resources Savings Banking Corporation | 621,328,017.45 | 1,312,494,388.25 | 4.73% | 9.47% | 14.20% | 18.94% | 23.67% |
| BPI Family Savings Bank | 6,929,894,886.68 | 15,625,229,419.16 | 4.44% | 8.87% | 13.31% | 17.74% | 22.18% |
| Luzon Development Bank | 207,273,406.13 | 467,765,497.15 | 4.43% | 8.86% | 13.29% | 17.72% | 22.16% |
| Cordillera Savings Bank | 46,658,316.65 | 114,956,104.55 | 4.06% | 8.12% | 12.18% | 16.24% | 20.29% |
| Bank One Savings and Trust Corp. | 212,138,095.35 | 522,793,794.10 | 4.06% | 8.12% | 12.17% | 16.23% | 20.29% |
| Sampaguita SLA | 33,770,458.09 | 85,749,472.39 | 3.94% | 7.88% | 11.81% | 15.75% | 19.69% |
| UCPB Savings Bank | 864,325,257.51 | 2,242,683,271.11 | 3.85% | 7.71% | 11.56% | 15.42% | 19.27% |
| Sterling Bank of Asia Inc. | 759,230,533.00 | 2,013,529,012.56 | 3.77% | 7.54% | 11.31% | 15.08% | 18.85% |
| Allied Savings Bank | 356,203,769.02 | 1,017,246,565.62 | 3.50% | 7.00% | 10.50% | 14.01% | 17.51% |
| Silangan Savings and Loan Bank, Inc. | 17,852,624.58 | 51,238,430.87 | 3.48% | 6.97% | 10.45% | 13.94% | 17.42% |
| Pampanga Development Bank | 41,660,931.67 | 125,163,058.50 | 3.33% | 6.66% | 9.99% | 13.31% | 16.64% |
| Malasiqui Progressive SLB, Inc. | 17,755,918.15 | 57,540,947.14 | 3.09% | 6.17% | 9.26% | 12.34% | 15.43% |
| Philippine Business Bank | 1,184,818,220.39 | 3,934,592,014.14 | 3.01% | 6.02% | 9.03% | 12.05% | 15.06% |
| Tower Development Bank | 32,674,490.06 | 118,433,563.41 | 2.76% | 5.52% | 8.28% | 11.04% | 13.79% |
| Maritime SLA | 18,551,268.51 | 68,811,839.22 | 2.70% | 5.39% | 8.09% | 10.78% | 13.48% |
| Quezon Coconut Producers SLB Inc. | 15,704,554.47 | 58,300,771.65 | 2.69% | 5.39% | 8.08% | 10.77% | 13.47% |
| BPI Direct Savings Bank | 200,707,824.41 | 766,396,820.94 | 2.62% | 5.24% | 7.86% | 10.48% | 13.09% |
| Life Savings Bank | 15,425,746.58 | 65,456,807.08 | 2.36% | 4.71% | 7.07% | 9.43% | 11.78% |
| First Consolidated Bank | 454,426,990.76 | 1,965,455,035.15 | 2.31% | 4.62% | 6.94% | 9.25% | 11.56% |
| Lemery Savings & Loan Bank, Inc. | 15,016,699.12 | 71,454,318.24 | 2.10% | 4.20% | 6.30% | 8.41% | 10.51% |
| Hiyas Savings & Loan Bank | 34,167,307.18 | 171,907,664.98 | 1.99% | 3.98% | 5.96% | 7.95% | 9.94% |
| Dungganon Bank | 12,175,392.51 | 64,839,980.89 | 1.88% | 3.76% | 5.63% | 7.51% | 9.39% |
| CityState Savings Bank | 109,440,387.31 | 806,533,911.73 | 1.36% | 2.71% | 4.07% | 5.43% | 6.78% |
| The Queen City Development Bank | 74,464,177.14 | 684,680,835.05 | 1.09% | 2.18% | 3.26% | 4.35% | 5.44% |
| City Savings Bank | 216,659,328.06 | 1,992,880,797.04 | 1.09% | 2.17% | 3.26% | 4.35% | 5.44% |
| Wealth Bank - A Development Bank | 44,087,172.44 | 418,457,222.96 | 1.05% | 2.11% | 3.16% | 4.21% | 5.27% |
| Sun Savings Bank | 5,276,108.19 | 77,159,514.33 | 0.68% | 1.37% | 2.05% | 2.74% | 3.42% |
| Isla Bank (A Thrift Bank) Inc. | 35,287,750.04 | 631,893,880.25 | 0.56% | 1.12% | 1.68% | 2.23% | 2.79% |
| Century Savings Bank | 42,249,723.90 | 873,232,215.08 | 0.48% | 0.97% | 1.45% | 1.94% | 2.42% |
| Progress SLA | 3,593,589.40 | 84,769,900.88 | 0.42% | 0.85% | 1.27% | 1.70% | 2.12% |
| Bataan SLA | 2,783,653.43 | 73,936,671.64 | 0.38% | 0.75% | 1.13% | 1.51% | 1.88% |
| HSBC Savings Bank (Phils) Inc. | 101,311,055.49 | 2,877,120,064.23 | 0.35% | 0.70% | 1.06% | 1.41% | 1.76% |
| Optimum Development Bank | 16,269,278.12 | 683,355,419.98 | 0.24% | 0.48% | 0.71% | 0.95% | 1.19% |
| Merchants Savings & Loan Association Inc. | 795,000.00 | 6,522,665,880.14 | 0.00% | 0.00% | 0.00% | 0.00% | 0.01% |
| BDO Elite Savings Bank | 0.00 | 1,507,557,562.16 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Card SME Bank Inc. (A Thrift Bank) | 0.00 | 190,550,540.55 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Microfinance Maximum SB (Maxbank) | 0.00 | 62,266,587.38 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Northpoint Development Bank | 0.00 | 92,372,200.96 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Pacific Ace Savings Bank | 0.00 | 75,790,600.32 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Pridestar Development Bank | 0.00 | 71,698,825.23 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| World Partners Bank (A Thrift Bank) | 0.00 | 180,827,639.98 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Grand Total | 58,925,000,678.78 | 92,629,287,402.98 | 6.36% | 12.72% | 19.08% | 25.45% | 31.81% |
Source: www.bsp.gov.ph
