Overstated Capital of Philippine Banks as of September 30, 2013

On July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged 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, ten banks have Deferred Charges as of September 30, 2013:

1. Planters Development Bank (Deferred Charges of 57.78% of SE)
2. United Coconut Planters Bank (Deferred Charges of 47.44% of SE)
3. Bataan Development Bank (Deferred Charges of 19.16% of SE)
4. Citibank Savings Inc. (Deferred Charges of 5.64% of SE)
5. Bank of Commerce (Deferred Charges of 4.91% of SE)
6. City Savings Bank, Inc. (Deferred Charges of 2.16% of SE)
7. Card SME Bank, Inc. (Deferred Charges of 1.74% of SE)
8. Wealth Development Bank Corporation (Deferred Charges of 0.75% of SE)
9. Banco De Oro Unibank, Inc. (Deferred Charges of 0.10% of SE)
10. Farmers Savings and Loan Bank (Deferred Charges of 0.00% of SE)

It must be noted that five of these banks were ranked as  distressed (highlighted in yellow) as of June 30, 2013:

1. United Coconut Planters Bank (Distressed Ratio of 508.63%)
2. Planters Development Bank  (Distressed Ratio of 264.16%)
3. Bataan Development Bank (Distressed Ratio of 219.19%)
4. Bank of Commerce (Distressed Ratio of 171.27%)
5. Farmers Savings and Loan Bank (Distressed Ratio of 169.26%)

For more information on distressed banks, please see the previous blog post: "The Top Distressed Philippine Banks as of June 30, 2013.

For two of the banks, the immediate booking their Deferred Charges will only serve to impair 25% or more of their Stockholders Equity as of September 30, 2013:

1. Planters Development Bank (Deferred Charges of 57.78% of SE)
2. United Coconut Planters Bank (Deferred Charges of 47.44% of SE)

Naturally, these banks are considered distressed.

Retained Earnings

Only five banks have sufficient Retained Earnings (RE) to absorb their unbooked losses as of September 30, 2013:

1. Planters Development Bank (Deferred Charges of 92.38% of RE)
2. Wealth Development Bank Corporation (Deferred Charges of 4.57% of RE)
3. City Savings Bank, Inc. (Deferred Charges of 2.99% of RE)
4. Banco De Oro Unibank (Deferred Charges of 0.46% of RE)
5. Farmers Savings and Loan Bank, Inc. (Deferred Charges of 0.01% of RE)

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

1. Bataan Development Bank (Deferred Charges of 247.28% of RE)
2. United Coconut Planters Bank (Deferred Charges of 162.08% of RE)

Three of the banks with  Deferred Charges have negative Retained Earnings.  As such, they do not have the capacity to absorb additional losses.

1. Card SME Bank (Retained Earnings of - Php 6.437 million vs. Deferred Charges of Php 4.130 million)
2. Bank of Commerce (Retained Earnings of - PhP 4.298 million vs. Deferred Charges of Php 0.762 million)
3. Citibank Savings Inc. (Retained Earnings of - Php 2.719 million vs. Deferred Charges of Php 88.743 million)

For more information of these Deferred Charges, please consult the previous blog "Can Philippine Banks Charge Their Unbooked Losses Against Retained Earnings? - June 30, 2013, "Can Philippine Banks Charge their Unbooked Losses Against Retained Earnings? - March 31, 2013", "Can Philippine Universal and Commercial Banks Charge their Unbooked Losses Against Retained Earnings? - December 31, 2012" and "Can Philippine Thrift Banks Charge their Unbooked Losses Against Retained Earnings? - December 31, 2012".

Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholder's Equity
In Php
September 30, 2013
Bank	Type of Bank	Deferred Charges	Unbooked Losses	Total Deferred Charges	SE	Adjusted SE	Impact on SE
PLANTERS DEVELOPMENT BANK	Thrift	1,810,401,941.40	0.00	1,810,401,941.40	3,133,227,648.33	1,322,825,706.93	57.78%
UNITED COCONUT PLANTERS BANK	U/KB	9,841,900,553.53	0.00	9,841,900,553.53	20,746,333,625.69	10,904,433,072.16	47.44%
BATAAN DEVELOPMENT BANK	Thrift	12,622,898.42	0.00	12,622,898.42	65,886,982.35	53,264,083.93	19.16%
CITIBANK SAVINGS INC	Thrift	88,743,565.53	0.00	88,743,565.53	1,574,388,139.34	1,485,644,573.81	5.64%
BANK OF COMMERCE	U/KB	762,361,522.68	0.00	762,361,522.68	15,518,003,350.98	14,755,641,828.30	4.91%
CITY SAVINGS BANK INC	Thrift	62,880,258.70	0.00	62,880,258.70	2,910,703,059.42	2,847,822,800.72	2.16%
CARD SME BANK INC A THRIFT BANK	Thrift	4,130,188.63	0.00	4,130,188.63	237,063,154.84	232,932,966.21	1.74%
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	3,004,671.44	0.00	3,004,671.44	401,547,654.84	398,542,983.40	0.75%
BDO UNIBANK INC	U/KB	160,187,699.05	0.00	160,187,699.05	161,661,538,506.02	161,501,350,806.97	0.10%
FARMERS SAVINGS & LOAN BANK INC	Thrift	4,498.56	0.00	4,498.56	112,083,965.94	112,079,467.38	0.00%
Grand Total		12,746,237,797.94	0.00	12,746,237,797.94	206,360,776,087.75	193,614,538,289.81	6.18%

Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In Php
September 30, 2013
Bank	Unbooked Losses	RE	Adjusted RE	Impact on RE
BATAAN DEVELOPMENT BANK	12,622,898.42	5,104,745.18	-7,518,153.24	247.28%
UNITED COCONUT PLANTERS BANK	9,841,900,553.53	6,072,377,000.13	-3,769,523,553.40	162.08%
PLANTERS DEVELOPMENT BANK	1,810,401,941.40	1,959,724,386.02	149,322,444.62	92.38%
WEALTH DEVELOPMENT BANK CORPORATION	3,004,671.44	65,710,269.24	62,705,597.80	4.57%
CITY SAVINGS BANK INC	62,880,258.70	2,106,371,414.79	2,043,491,156.09	2.99%
BDO UNIBANK INC	160,187,699.05	34,474,604,358.92	34,314,416,659.87	0.46%
FARMERS SAVINGS & LOAN BANK INC	4,498.56	33196749.26	33,192,250.70	0.01%
CITIBANK SAVINGS INC	88,743,565.53	-2,719,271,287.77	-2,808,014,853.30	-3.26%
BANK OF COMMERCE	762,361,522.68	-4,297,945,777.88	-5,060,307,300.56	-17.74%
CARD SME BANK INC A THRIFT BANK	4,130,188.63	-6,436,878.43	-10,567,067.06	-64.16%
Grand Total	12,746,237,797.94	37,693,434,979.46	24,947,197,181.52	33.82%

Source: www.bsp.gov.ph

The Capital Adequacy Ratios of Philippine Banks - September 30, 2013

A bank's Capital Adequacy Ratio is a measure of a bank's capital and financial strength.  It is expressed as a percentage of a bank's risk weighted credit exposures.  It is also known as the "Capital to Risk Weighted Assets Ratio (CRAR).

The general formula is as follows:

CAR = (Tier 1 Capital + Tier 2 Capital)/Risk Weighted Assets

Tier 1 Capital

Tier 1 CAR is the ratio of a bank's core or equity capital to its total risk-weighted assets.  It measures financial strength from a regulator's point of view. Tier 1 Capital measures the bank's ability to absorb losses without a bank being required to cease trading.

The formula for Tier 1 Capital is as follows:

Tier 1 Capital = (Paid-up Capital + Statutory Reserves + Disclosed Free Reserves) - (Equity Investments in Subsidiary + Intangible Assets + Current & B/F losses)

Tier 1 CAR = Tier 1 Capital/Risk Weighted Assets

Tier 2 Capital

Tier 2 Capital is supplementary capital.  It measures the ability of a bank to absorb losses in the event of a winding up and so it provides a lesser degree of protection to depositors.

The formula for Tier 2 Capital is as follows:

 Tier 2 Capital = Undisclosed Reserves + General Loss Reserves + Hybrid Debt Capital Instruments and Subordinated Debts.

Risk Weighted Assets

Risk Weighted Assets are a bank's on balance sheet assets and off-balance sheet exposures, weighted according to risk.  Different classes of assets have different risk weightings.  For instance, cash on hand or a government bond has zero risk weighting and are subtracted from the total risk assets.  A loan would have a 100% risk weighthing - it would be counted towards the total risk assets of the bank.

More information about this can be found here.

Minimum Capital Requirements

International Guidelines

Basel III is the global requlatory standard on bank capital adequacy, stress testing, and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision.

Under Basel III, the minimum Common Equity Tier 1 Capital Ratio is 4.5%, Tier 1 Capital Ratio is 6.0%, conservation buffer is 2.5%, and the minimum Total CAR is 8.0%.

For more information on Basel III, read this.

BSP Guidelines

The BSP issued new BASEL III Implementing Guidelines that will take effect on January 1, 2014. Under the new guidelines:

"Banks must now meet specific minimum thresholds for so-called Common Equity Tier 1 (CET1) capital and Tier 1 (T1) capital in addition to the Capital Adequacy Ratio (CAR). These regulatory thresholds effectively move banks worldwide to rely more on core capital instruments like CET1 and T1 issues. This is in lieu of hybrid instruments which did not fare well in the latest global crisis as far as absorbing losses. The ability to absorb losses is central to Basel III.

The BSP maintained the minimum Capital Adequacy Ratio (CAR) at 10.0 percent. In addition to CAR, the new framework sets a CET1 ratio of at least 6.0 percent and the Tier I capital ratio is at a minimum of 7.5 percent. 

The new guidelines also introduce a capital conservation buffer of 2.5 percent which shall be made up of CET1 capital. In addition, banks which issued capital instruments from 2011 will be allowed to count these instruments as Basel III-eligible until end-2015

Under these guidelines, several Philippine Thrift Banks currently do not meet these guidelines as of September 30, 2013.  The banks that fail to meet BSP's minimum capital requirements are as follows:

TOTAL CAR

1. Bataan Savings and Loan Bank (Total CAR of 0.00%)
2. Enterprise Bank Inc. (Total CAR of 0.00%)
3. The Palawan Bank (Total CAR of 7.74%)
4. The Real Bank (Total CAR of 8.15%)
5. Planters Development Bank (Total CAR of 8.50%)
6. Equicom Savings Bank Inc. (Total CAR of 9.94%)

Tier One CAR

1. Bataan Savings and Loan Bank (Tier One CAR of 0.00%)
2. Business & Consumers Bank (Tier One CAR of 0.00%)
3. Enterprise Bank Inc. (Tier One CAR of 0.00%)
4. Equicom Savings Bank, Inc. (Tier One CAR of 0.00%)
5. Inter-Asia Development Bank (Tier One CAR of 0.00%)
6. Maritime Savings Bank Corporation (Tier One CAR of 0.00%)
7. Optimum Development Bank (Tier One CAR of 0.00%)
8. Planters Development Bank (Tier One CAR of 4.25%)
9. The Palawan Bank (Tier One CAR of 5.64%)
10. The Real Bank (Tier One CAR of 7.28%)
11. China Bank Savings Inc. (Tier One CAR of 9.37%)

In addition to this list, Silangan Savings and Loan Bank, Inc., which had a Total CAR of 10.18 and Tier One CAR of 10.18 as of September 30, 2013 (or just above the BSP minimums for these CAR ratios) failed as of January 9, 2014.  For more details, check out a previous blog post "A Short Analysis of Recent Bank Failures since the Failure of Banco Filipino".  This bank was also highlighted as one of the "The Top Distressed Philippine Banks as of June 30, 2013".

The Total CAR and Tier 1 CAR of Philippine Banks as of September 30, 2013 is as follows:(Banks that do not meet BSP's minimum capital requirements are highlighted in yellow, Banks that failed are highlighted in red):

Philippine Banking System
TOTAL CAR
September 30, 2013
Bank	Type of Bank	Total CAR (%)
BATAAN SAVINGS AND LOAN BANK	Thrift	0.00
ENTERPRISE BANK INC (A THRIFT BANK)	Thrift	0.00
THE PALAWAN BANK (PALAWAN DB) INC	Thrift	7.74
THE REAL BANK (A THRIFT BANK) INC	Thrift	8.15
PLANTERS DEVELOPMENT BANK	Thrift	8.50
EQUICOM SAVINGS BANK INC	Thrift	9.94
SILANGAN SAVINGS & LOAN BANK INC	Thrift	10.18
STANDARD CHARTERED BANK	U/KB	10.97
UNITED COCONUT PLANTERS BANK	U/KB	11.86
OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE THRIFT BANK)	Thrift	11.91
CITY SAVINGS BANK INC	Thrift	12.12
CHINA BANK SAVINGS INC	Thrift	12.36
BPI GLOBE BANKO INC A SAVINGS BANK	Thrift	12.54
METROPOLITAN BANK & TRUST CO	U/KB	13.19
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	13.39
PHILIPPINE POSTAL SAVINGS BANK INC	Thrift	13.43
HONGKONG & SHANGHAI BANKING CORP	U/KB	13.47
UNIVERSITY SAVINGS BANK INC	Thrift	14.24
SECURITY BANK SAVINGS CORPORATION	Thrift	14.62
STERLING BANK OF ASIA INC (A SAVINGS BANK)	Thrift	14.64
BANK OF THE PHILIPPINE ISLANDS	U/KB	14.82
CITIBANK SAVINGS INC	Thrift	15.10
LUZON DEVELOPMENT BANK	Thrift	15.22
BPI FAMILY SAVINGS BANK INC	Thrift	15.27
BDO UNIBANK INC	U/KB	15.29
WORLD PARTNERS BANK (A THRIFT BANK)	Thrift	16.30
RIZAL COMMERCIAL BANKING CORPORATION	U/KB	16.65
PHILIPPINE RESOURCES SAVINGS BANKING	Thrift	16.69
CHINA BANKING CORPORATION	U/KB	16.74
ANZ BANKING GROUP LTD	U/KB	16.84
RCBC SAVINGS BANK INC	Thrift	17.06
FARMERS SAVINGS & LOAN BANK INC	Thrift	17.22
PHILIPPINE NATIONAL BANK	U/KB	17.25
EAST WEST BANKING CORPORATION	U/KB	17.27
COMSAVINGS BANK	Thrift	17.35
ILOILO CITY DEVELOPMENT BANK	Thrift	17.43
HIYAS BANKING CORPORATION	Thrift	17.50
VILLAGE BANK INC (A THRIFT BANK)	Thrift	17.59
PHILIPPINE BANK OF COMMUNICATIONS	U/KB	17.80
BPI DIRECT SAVINGS BANK INC	Thrift	18.28
SECURITY BANK CORPORATION	U/KB	18.38
PHILIPPINE SAVINGS BANK	Thrift	18.43
PHILIPPINE VETERANS BANK	U/KB	18.76
BATAAN DEVELOPMENT BANK	Thrift	19.12
ASIA UNITED BANK CORPORATION	U/KB	19.18
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	Thrift	19.53
UNION BANK OF THE PHILIPPINES	U/KB	19.66
CITIBANK, N.A.	U/KB	20.72
DEVELOPMENT BANK OF THE PHILIPPINES	U/KB	20.94
NORTHPOINT DEV'T BANK INC	Thrift	21.08
MAYBANK PHILIPPINES INC	U/KB	21.29
LAND BANK OF THE PHILIPPINES	U/KB	21.46
PRODUCERS SAVINGS BANK CORPORATION	Thrift	21.60
MALAYAN BANK SAVINGS AND MORT BANK INC	Thrift	21.89
HSBC SAVINGS BANK(PHILS) INC	Thrift	21.91
BANK OF COMMERCE	U/KB	22.05
MIZUHO BANK LTD - MANILA BRANCH	U/KB	23.44
FIRST CONSOLIDATED BANK INC (A PDB)	Thrift	23.86
THE BANK OF TOKYO-MITSUBISHI UFJ LTD	U/KB	23.86
CARD SME BANK INC A THRIFT BANK	Thrift	24.19
BANK OF CHINA LIMITED-MANILA BRANCH	U/KB	24.97
ROBINSONS BANK CORPORATION	U/KB	25.18
DEUTSCHE BANK AG	U/KB	25.44
ALLIED SAVINGS BANK	Thrift	25.72
UCPB SAVINGS BANK	Thrift	25.72
PHILIPPINE BUSINESS BANK INC A SAVINGS	Thrift	25.89
CHINATRUST BANKING CORPORATION	U/KB	27.76
KOREA EXCHANGE BANK	U/KB	28.09
DUMAGUETE CITY DEVELOPMENT BANK INC	Thrift	28.56
METRO CEBU PUBLIC SAVINGS BANK	Thrift	29.60
BUSINESS AND CONSUMERS BANK (A DB)	Thrift	29.74
LIFE SAVINGS BANK INC	Thrift	30.10
INTER-ASIA DEVELOPMENT BANK	Thrift	33.10
LEMERY SAVINGS & LOAN BANK, INC.	Thrift	33.10
CORDILLERA SAVINGS BANK INC	Thrift	33.14
MARITIME SAVINGS BANK CORPORATION	Thrift	34.26
PHILIPPINE TRUST COMPANY	U/KB	34.41
CITYSTATE SAVINGS BANK INC	Thrift	34.55
PAMPANGA DEVELOPMENT BANK	Thrift	34.66
MICROFINANCE MAXIMUM SB INC	Thrift	36.45
MEGA INTERNATIONAL COMMERCIAL BANK CO LTD	U/KB	37.25
INTERNATIONALE NEDERLANDEN GROEP BK	U/KB	40.44
BDO PRIVATE BANK, INC.	U/KB	41.21
TONG YANG SAVINGS BANK INC	Thrift	42.78
MALASIQUI PROGRESSIVE SLB, INC	Thrift	45.13
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	Thrift	51.90
PACIFIC ACE SAVINGS BANK INC	Thrift	52.32
PRIDE STAR DEVELOPMENT BANK INC	Thrift	52.78
SAMPAGUITA SAVINGS BANK INC	Thrift	52.98
TOWER DEVELOPMENT BANK	Thrift	54.16
SUN SAVINGS BANK INC	Thrift	56.23
JP MORGAN CHASE BANK NATIONAL ASSOCIATION.	U/KB	57.21
PROGRESS SAVINGS AND LOAN BANK INC	Thrift	59.47
BANK OF AMERICA N.A.	U/KB	60.41
OPTIMUM DEVELOPMENT BANK INC	Thrift	61.47
DUNGGANON BANK (A MICROFINANCE THRIFT	Thrift	62.82
QUEZON COCONUT BANK INC (A THRIFT BANK)	Thrift	66.44
BANK ONE SAVINGS AND TRUST CORPORATION	Thrift	71.12
MERCHANTS SAVINGS & LOAN ASSN INC	Thrift	82.52
CENTURY SAVINGS BANK CORPORATION	Thrift	90.75
BANGKOK BANK PUBLIC CO LTD	U/KB	106.81
UNITED OVERSEAS BANK PHILIPPINES	Thrift	106.93
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	U/KB	149.69
ISLA BANK(A THRIFT BANK) INC	Thrift	234.85
BDO ELITE SAVINGS BANK INC	Thrift	517.44

Philippine Banking System
Tier One CAR
September 30, 2013
Bank	Type of Bank	Tier One CAR
BATAAN SAVINGS AND LOAN BANK	Thrift	0.00
BUSINESS AND CONSUMERS BANK (A DB)	Thrift	0.00
ENTERPRISE BANK INC (A THRIFT BANK)	Thrift	0.00
EQUICOM SAVINGS BANK INC	Thrift	0.00
INTER-ASIA DEVELOPMENT BANK	Thrift	0.00
MARITIME SAVINGS BANK CORPORATION	Thrift	0.00
OPTIMUM DEVELOPMENT BANK INC	Thrift	0.00
PLANTERS DEVELOPMENT BANK	Thrift	4.25
THE PALAWAN BANK (PALAWAN DB) INC	Thrift	5.64
THE REAL BANK (A THRIFT BANK) INC	Thrift	7.28
CHINA BANK SAVINGS INC	Thrift	9.37
SILANGAN SAVINGS & LOAN BANK INC	Thrift	10.18
STANDARD CHARTERED BANK	U/KB	10.44
STERLING BANK OF ASIA INC (A SAVINGS BANK)	Thrift	10.45
CITY SAVINGS BANK INC	Thrift	11.25
UNITED COCONUT PLANTERS BANK	U/KB	11.86
BPI GLOBE BANKO INC A SAVINGS BANK	Thrift	12.13
PHILIPPINE POSTAL SAVINGS BANK INC	Thrift	12.51
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	12.53
PHILIPPINE BANK OF COMMUNICATIONS	U/KB	13.01
METROPOLITAN BANK & TRUST CO	U/KB	13.19
HONGKONG & SHANGHAI BANKING CORP	U/KB	13.47
SECURITY BANK SAVINGS CORPORATION	Thrift	13.70
LUZON DEVELOPMENT BANK	Thrift	14.11
BPI FAMILY SAVINGS BANK INC	Thrift	14.39
EAST WEST BANKING CORPORATION	U/KB	14.41
CITIBANK SAVINGS INC	Thrift	14.43
BDO UNIBANK INC	U/KB	14.53
LAND BANK OF THE PHILIPPINES	U/KB	14.61
BANK OF THE PHILIPPINE ISLANDS	U/KB	14.82
PHILIPPINE RESOURCES SAVINGS BANKING	Thrift	15.01
PHILIPPINE SAVINGS BANK	Thrift	15.24
PHILIPPINE NATIONAL BANK	U/KB	15.81
WORLD PARTNERS BANK (A THRIFT BANK)	Thrift	15.84
CHINA BANKING CORPORATION	U/KB	16.16
ANZ BANKING GROUP LTD	U/KB	16.38
RCBC SAVINGS BANK INC	Thrift	16.41
FARMERS SAVINGS & LOAN BANK INC	Thrift	16.46
RIZAL COMMERCIAL BANKING CORPORATION	U/KB	16.65
VILLAGE BANK INC (A THRIFT BANK)	Thrift	17.20
HIYAS BANKING CORPORATION	Thrift	17.22
SECURITY BANK CORPORATION	U/KB	17.26
BPI DIRECT SAVINGS BANK INC	Thrift	17.42
DEVELOPMENT BANK OF THE PHILIPPINES	U/KB	17.60
COMSAVINGS BANK	Thrift	17.96
UNION BANK OF THE PHILIPPINES	U/KB	18.56
PHILIPPINE VETERANS BANK	U/KB	18.57
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	Thrift	18.81
BATAAN DEVELOPMENT BANK	Thrift	18.82
ASIA UNITED BANK CORPORATION	U/KB	19.08
CITIBANK, N.A.	U/KB	20.01
MAYBANK PHILIPPINES INC	U/KB	20.15
NORTHPOINT DEV'T BANK INC	Thrift	21.08
HSBC SAVINGS BANK(PHILS) INC	Thrift	21.13
PRODUCERS SAVINGS BANK CORPORATION	Thrift	21.27
MALAYAN BANK SAVINGS AND MORT BANK INC	Thrift	21.42
BANK OF COMMERCE	U/KB	21.95
MIZUHO BANK LTD - MANILA BRANCH	U/KB	22.50
FIRST CONSOLIDATED BANK INC (A PDB)	Thrift	22.96
THE BANK OF TOKYO-MITSUBISHI UFJ LTD	U/KB	23.09
BANK OF CHINA LIMITED-MANILA BRANCH	U/KB	24.41
ALLIED SAVINGS BANK	Thrift	24.88
UCPB SAVINGS BANK	Thrift	24.98
DEUTSCHE BANK AG	U/KB	25.15
ROBINSONS BANK CORPORATION	U/KB	25.18
PHILIPPINE BUSINESS BANK INC A SAVINGS	Thrift	25.29
CARD SME BANK INC A THRIFT BANK	Thrift	26.88
CHINATRUST BANKING CORPORATION	U/KB	27.02
KOREA EXCHANGE BANK	U/KB	27.70
DUMAGUETE CITY DEVELOPMENT BANK INC	Thrift	28.05
METRO CEBU PUBLIC SAVINGS BANK	Thrift	28.84
CORDILLERA SAVINGS BANK INC	Thrift	32.67
CITYSTATE SAVINGS BANK INC	Thrift	34.02
PHILIPPINE TRUST COMPANY	U/KB	34.02
MEGA INTERNATIONAL COMMERCIAL BANK CO LTD	U/KB	36.31
LEMERY SAVINGS & LOAN BANK, INC.	Thrift	36.42
INTERNATIONALE NEDERLANDEN GROEP BK	U/KB	40.19
BDO PRIVATE BANK, INC.	U/KB	41.10
TONG YANG SAVINGS BANK INC	Thrift	42.78
MALASIQUI PROGRESSIVE SLB, INC	Thrift	44.94
UNIVERSITY SAVINGS BANK INC	Thrift	49.01
MICROFINANCE MAXIMUM SB INC	Thrift	50.22
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	Thrift	51.30
PACIFIC ACE SAVINGS BANK INC	Thrift	52.21
OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE THRIFT BANK)	Thrift	53.86
SUN SAVINGS BANK INC	Thrift	55.30
SAMPAGUITA SAVINGS BANK INC	Thrift	56.88
JP MORGAN CHASE BANK NATIONAL ASSOCIATION.	U/KB	57.09
QUEZON COCONUT BANK INC (A THRIFT BANK)	Thrift	58.23
PROGRESS SAVINGS AND LOAN BANK INC	Thrift	59.47
BANK OF AMERICA N.A.	U/KB	60.19
DUNGGANON BANK (A MICROFINANCE THRIFT	Thrift	62.10
LIFE SAVINGS BANK INC	Thrift	63.31
PRIDE STAR DEVELOPMENT BANK INC	Thrift	68.13
BANK ONE SAVINGS AND TRUST CORPORATION	Thrift	70.54
ILOILO CITY DEVELOPMENT BANK	Thrift	74.74
MERCHANTS SAVINGS & LOAN ASSN INC	Thrift	82.33
CENTURY SAVINGS BANK CORPORATION	Thrift	89.62
PAMPANGA DEVELOPMENT BANK	Thrift	104.91
BANGKOK BANK PUBLIC CO LTD	U/KB	105.84
UNITED OVERSEAS BANK PHILIPPINES	Thrift	106.80
TOWER DEVELOPMENT BANK	Thrift	107.91
ISLA BANK(A THRIFT BANK) INC	Thrift	234.58
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	U/KB	406.94
BDO ELITE SAVINGS BANK INC	Thrift	517.44

A Short Analysis of Recent Bank Failures since the Failure of Banco Filipino - Updated

Today, news reports came out that the Cavite-based Silangan Savings and Loan Bank, Inc. was closed by regulators BSP last Thursday, January 9, 2014.  The bank was small, having just 1,367 deposit accounts and Php 72.49 million in deposit liabilities as of September 30, 2013.  According to the news reports, less than 1% of those deposits are uninsured, leaving an overwhelming 99% of deposits accounts intact but inconvenienced by the closure.

This bank is the third bank (thrift bank or larger) to fail since the spectacular demise of Banco Filipino on March 17, 2011.  There have also been numerous failures of rural and cooperative banks but data on those banks is hard, if not impossible, for an outsider to obtain.

The three banks that failed are as follows:

1. LBC Development Bank (closed September 9, 2011)
2. Export and Industry Bank (closed April 27, 2012)
3. Silangan Savings and Loan Bank (closed January 9, 2014)

Here is a table of some of their relevant information and ratios:

Recent Philippine Bank Failures/Closures
Since March 17, 2011 (Outside of Banco Filipino)
	LBC Development Bank	Export and Industry Bank	Silangan Savings and Loan Bank
Date of Failure/Closure	September 9, 2011	April 27, 2012	January 9, 2014
Latest Published Statement of Condition from BSP	June 30, 2011	June 30, 2011	September 30, 2013
Capital Adequacy Ratio
Total CAR (BSP Minimum 10.00%)	6.59	-5.12	10.18
Tier 1 CAR (BSP Minimum 10.00%)	6.55	-5.11	10.18
NPLs
Gross NPLs/Gross TLP	32.32%	7.89%	54.09%
Gross NPLs/SE	69.73%	14.26%	192.93%
DOSRI
DOSRI/TLP	2.16%	0.09%	9.26%
DOSRI/SE	4.65%	0.17%	33.03%
DOSRI Past Due/DOSRI	0.00%	0.00%	100.00%
Classified Loans
Classified Loans/Gross NPLs	226.21%	79.94%	82.88%
Classified Loans/Total Capital Cushion	90.65%	6.57%	30.98%
Distressed Assets
Distressed Assets/Total Capital Cushion	781.95%	862.13%	124.22%

* Some ratios are based on Net Total Loan Portfolio and not Gross Total Loan Portfolio

Source: www.bsp.gov.ph


Nothing in Common

Based on the table above, the bank had very little in common that can be pinpointed as a source of failure.  Two banks, LBC Development Bank (LBC) and Export and Industry Bank (EIB) , had Capital Adequacy Ratios below the BSP minimum standard of 10.00 but Silangan Savings and Loan Bank (Silangan), the most recent bank to fail, had Capital Adequacy Ratios of at least 10.00 as of September 30, 2013.

In terms of NPLs, both LBC and Silangan had relatively high NPL ratios but EIB did not. Likewise, LBC and EIB had very little in terms of reported DOSRI loans but Silangan had a high level of DOSRI loans.  Moreover, 100% of its DOSRI Loans were past due.  As it turned out, both LBC and EIB had strong indications of fraud and self-dealing.  Is this the case with Silangan? Maybe so but it's too early to tell.

The same holds true for their level of Classified Loans.  They all had varying levels of Classified Loans relative to their NPLs and relative to their Total Capital Cushion.

So What Did They Have In Common: High Levels of Distressed Assets:

At the time of failure, all three banks had high levels of Distressed Assets relative to their Total Capital Cushion.  All of their Distressed Asset Ratios were above 100% and were flagged as borderline insolvent.

LBC

LBC had a distressed ratio of 781.95% right before closure because a lot of their assets were in the form of "Other Assets" instead of Loans. LBC was highlighted as a distressed bank (using its December 31, 2010 financial statements) with this blog post: "LBC Development Bank bites the dust, Are there other LBC's out there waiting to implode?" and with this blog post: "Are there other banks ready to implode? - Thrift Bank Edition as of March 31, 2011"

EIB

EIB's Distressed Ratio was high because it had a very high level of unbooked losses masquerading as assets.  In reality, it had a negative capital base since 2005 and had never recovered since then. EIB was highlighted  several times, beginning with this blog post: "Slight Deterioration in the Solvency of Listed Philippine Banks", and this one, "Export and Industry Bank Becomes Even More Insolvent! - September 30, 2011", and lastly this one, "Time is Running Out for Export and Industry Bank"

Silangan

As can be seen from the chart above.  Silangan, the most recent failure, had a Distressed Asset Ratio of just 124.22% as of September 30, 2013 (latest available Published Statement of Condition).  The bank had been flagged as borderline insolvent at least a year earlier, since June 30, 2012, with a Distressed Asset Ratio of 112.16% (See this blog post: "The Top Distressed Philippine Banks as of June 30, 2012".  This ratio continued to climb above this level, reaching a peak of 125.55% by the second quarter of 2013.  This stood roughly at par with Philippine National Bank and higher than Philippine Veterans Bank.  There are at least 26 banks with Distressed Asset Ratios higher than Silangan's.  That list can be found here.