The Capital Adequacy Ratios of Philippine Banks - June 30, 2014

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.

Common Equity Tier 1 Ratio

Investopedia defines the Common Equity Tier 1 Ratio as a capital adequacy ratio that: 

"...excludes any preferred shares or non-controlling interests when determining the calculation. This differs from the Tier 1 capital ratio which is based on the sum of its equity capital and disclosed reserves, and sometimes non-redeemable, non-cumulative preferred stock."

"...Regulators use the Tier 1 common capital ratio to grade a firm's capital adequacy as one of the following rankings: Well-Capitalized, Adequately Capitalized, Undercapitalized, Significantly Undercapitalized, and Critically Undercapitalized."

Well Capitalized: Common Equity Tier 1 Ratio of 6% or more and does not pay any dividends that would affect its capital base.

Adequately Capitalized: Common Equity Tier 1 Ratio of 4% or more.

Undercapitalized: Common Equity Tier 1 Ratio below 4%.

Significantly Undercapitalized: Common Equity Tier 1 Ratio below 3%.

Critically Undercapitalized: Common Equity Tier 1 Ratio below 2%.

Banks "ranked as Undercapitalized or below are prohibited from paying any dividends or management fees.  In addition, they are required to file a capital restoration plan."

For more information regarding this, please read the BIS Basel III definition of capital.


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

Moreover, banks that are considered by the BSP as "too big to fail" (domestically systemically important banks) will have minimum common equity Tier 1 (CET1) Ratios that are higher by 1.5% to 3.5% higher than the existing minimum of 6.00% and the capital conservation buffer of 2.5%.

Under these guidelines, several Philippine Banks currently do not meet these guidelines as of June 30, 2014.  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. Comsavings Bank (Total CAR of 7.41%)
3. The Palawan Bank (Total CAR of 7.5%)
4. BPI Globe Banko Inc. (Total CAR of 7.90%)
5. Planters Development Bank (Total CAR of 8.20%)

Tier One CAR

1. 1st Valley Bank (Tier One CAR of 0.00%)
2. Bataan Savings and Loan Bank (Tier One CAR of 0.00%)
3. Business & Consumers Bank (Tier One CAR of 0.00%)
4. Enterprise Bank Inc. (Tier One CAR of 0.00%)
5. Equicom Savings Bank, Inc. (Tier One CAR of 0.00%)
6. Inter-Asia Development Bank (Tier One CAR of 0.00%)
7. Maritime Savings Bank Corporation (Tier One CAR of 0.00%)
8. Optimum Development Bank (Tier One CAR of 0.00%)
9. Planters Development Bank (Tier One CAR of 2.64%)
10. The Palawan Bank (Tier One CAR of 6.86%)
11. Sterling Bank of Asia Inc. (Tier One CAR of 7.23%)
12. BPI Globe Banko Inc. (Tier One CAR of 7.27%)
13. Comsavings Bank (Tier One CAR of 7.27%)
14. Philippine Bank of Communications (Tier One CAR of 7.98%)
15. World Partners Bank (Tier One CAR of 9.48%)
16. Rizal Commercial Banking Corporation (Tier One CAR of 9.96%)

Common Equity Tier One CAR

As stated above, the BSP's reporting guidelines on the Common Equity Tier One CAR (CET1) only took effect as of January 1, 2014.  Banks only started reporting this ratio in their Published Statements of Condition for June 30, 2014.  Over 60 banks reported their CET1 Ratio as 0.00% for June 30, 2014.

However, those banks that did report a CET1 Ratio other than 0.00%, four banks reported CET1 Ratios below BSP's recommended ratio.  They are as follows:

1. Robinsons Bank Corporation (CET1 Ratio of -1.76%)
2. Planters Development Bank (CET1 Ratio of 2.64%)
3. BPI Globe Banko Inc. (CET1 Ratio of 7.27%)
4. Rizal Commercial Banking Corporation (CET1 Ratio of 9.96%)

The Total CAR, Tier 1 CAR, and Common Equity Tier 1 CAR of Philippine Banks as of June 30, 2014 is as follows:(Banks that do not meet BSP's minimum capital requirements are highlighted in yellow):

Philippine Banking System
TOTAL CAR
June 30, 2014
Bank	Type of Bank	Total CAR
BATAAN SAVINGS AND LOAN BANK	Thrift	0.00
COMSAVINGS BANK	Thrift	7.41
THE PALAWAN BANK (PALAWAN DB) INC	Thrift	7.57
BPI GLOBE BANKO INC A SAVINGS BANK	Thrift	7.90
PLANTERS DEVELOPMENT BANK	Thrift	8.20
WORLD PARTNERS BANK (A THRIFT BANK)	Thrift	10.17
EQUICOM SAVINGS BANK INC	Thrift	10.25
UNITED COCONUT PLANTERS BANK	U/KB	10.46
OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE THRIFT BANK)	Thrift	10.71
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	11.35
EAST WEST BANKING CORP	U/KB	11.61
STERLING BANK OF ASIA INC (A SAVINGS BANK)	Thrift	11.69
ENTERPRISE BANK INC (A THRIFT BANK)	Thrift	12.01
PHIL BANK OF COMMUNICATIONS	U/KB	12.02
ALLIED SAVINGS BANK	Thrift	12.39
RCBC SAVINGS BANK INC	Thrift	12.48
CITY SAVINGS BANK INC	Thrift	12.61
UNION BANK OF THE PHILS	U/KB	13.00
BDO UNIBANK INC	U/KB	13.08
SECURITY BANK CORP	U/KB	13.20
RIZAL COMM'L BANKING CORP	U/KB	13.33
METROPOLITAN BANK & TCO	U/KB	13.44
PHIL POSTAL SAVINGS BANK INC	Thrift	13.76
STANDARD CHARTERED BANK	U/KB	13.79
LUZON DEVELOPMENT BANK	Thrift	14.16
BPI FAMILY SAVINGS BANK INC	Thrift	14.23
BANK OF THE PHIL ISLANDS	U/KB	14.31
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	Thrift	14.49
CHINA BANK SAVINGS INC	Thrift	15.48
LAND BANK OF THE PHILIPPINES	U/KB	15.51
1ST VALLEY BANK INC A DEVELOPMENT BANK	Thrift	15.73
PHIL NATIONAL BANK	U/KB	16.01
ASIA UNITED BANK CORPORATION	U/KB	16.24
FARMERS SAVINGS & LOAN BANK INC	Thrift	16.61
VILLAGE BANK INC (A THRIFT BANK)	Thrift	16.95
CHINA BANKING CORP	U/KB	17.03
HONGKONG & SHANGHAI BANKING CORP	U/KB	17.22
MALAYAN BANK SAVINGS AND MORT BANK INC	Thrift	17.72
LEGAZPI SAVINGS BANK INC	Thrift	17.81
BATAAN DEVELOPMENT BANK	Thrift	17.83
MICROFINANCE MAXIMUM SB INC	Thrift	17.91
HIYAS BANKING CORPORATION	Thrift	18.11
MAYBANK PHILIPPINES INC	U/KB	18.17
PRODUCERS SAVINGS BANK CORPORATION	Thrift	18.40
PHIL SAVINGS BANK	Thrift	19.01
ROBINSONS BANK CORPORATION	U/KB	19.71
BPI DIRECT SAVINGS BANK INC	Thrift	20.68
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS	Thrift	21.02
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	Thrift	21.30
PHILIPPINE VETERANS BANK	U/KB	21.40
CITIBANK, N.A.	U/KB	21.43
ANZ BANKING GROUP LTD	U/KB	21.98
DEVELOPMENT BANK OF THE PHIL	U/KB	22.11
CARD SME BANK INC A THRIFT BANK	Thrift	22.35
BANK OF CHINA LIMITED-MANILA BRANCH	U/KB	22.70
DEUTSCHE BANK AG	U/KB	22.87
BANK OF COMMERCE	U/KB	23.14
MIZUHO BANK LTD - MANILA BRANCH	U/KB	23.26
UCPB SAVINGS BANK	Thrift	24.28
DUMAGUETE CITY DEV BANK INC	Thrift	25.01
FIRST CONSOLIDATED BANK INC (A PDB)	Thrift	26.11
BDO PRIVATE BANK, INC.	U/KB	26.28
METRO CEBU PUBLIC SAVINGS BANK	Thrift	26.38
CITIBANK SAVINGS INC	Thrift	27.06
CTBC BANK (PHILIPPINES) CORP	U/KB	27.22
CITYSTATE SAVINGS BANK INC	Thrift	28.62
BUSINESS AND CONSUMERS BANK (A DB)	Thrift	28.63
NORTHPOINT DEV'T BANK INC	Thrift	29.16
LIFE SAVINGS BANK INC	Thrift	29.24
HSBC SAVINGS BANK(PHILS) INC	Thrift	29.32
INTER-ASIA DEVELOPMENT BANK	Thrift	29.99
MARITIME SAVINGS BANK CORPORATION	Thrift	31.80
LEMERY SAVINGS & LOAN BANK, INC.	Thrift	32.70
CORDILLERA SAVINGS BANK INC	Thrift	32.83
KOREA EXCHANGE BANK	U/KB	33.58
PAMPANGA DEVELOPMENT BANK	Thrift	34.78
PHIL TRUST COMPANY	U/KB	35.62
SUN SAVINGS BANK INC	Thrift	36.81
THE BNK OF TOKYO-MITSUBISHI UFJ LTD	U/KB	37.76
UNIVERSITY SAVINGS BANK INC	Thrift	40.30
TOWER DEVELOPMENT BANK	Thrift	42.41
MALASIQUI PROGRESSIVE SLB, INC	Thrift	43.12
TONGYANG SAVINGS BANK INC	Thrift	43.86
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	Thrift	43.98
DUNGGANON BANK (A MICROFINANCE THRIFT BANK) INC	Thrift	44.68
PRIDE STAR DEVELOPMENT BANK INC	Thrift	50.49
MEGA INT'L COMM'L BANK CO LTD	U/KB	53.77
PACIFIC ACE SAVINGS BANK INC	Thrift	55.20
SAMPAGUITA SAVINGS BANK INC	Thrift	56.15
BANK OF AMERICA N.A.	U/KB	57.20
BANK ONE SAVINGS AND TRUST CORP.	Thrift	57.60
JP MORGAN CHASE BANK NATIONAL ASSN.	U/KB	59.21
MERCHANTS SAVINGS & LOAN ASSN INC	Thrift	61.75
QUEZON COCONUT BANK INC (A THRIFT BANK)	Thrift	61.77
PROGRESS SAVINGS AND LOAN BANK INC	Thrift	62.61
OPTIMUM DEVELOPMENT BANK INC	Thrift	66.61
CENTURY SAVINGS BANK CORPORATION	Thrift	89.61
BANGKOK BANK PUBLIC CO LTD	U/KB	90.80
INTERNATIONALE NEDERLANDEN GROEP BK	U/KB	102.61
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	U/KB	117.20
UNITED OVERSEAS BANK PHILIPPINES	Thrift	163.92
ISLA BANK(A THRIFT BANK) INC	Thrift	183.58
BDO ELITE SAVINGS BANK INC	Thrift	401.25

Philippine Banking System
Tier One CAR
June 30, 2014
Bank	Type of Bank	Tier One CAR
1ST VALLEY BANK INC A DEVELOPMENT BANK	Thrift	0.00
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	2.64
THE PALAWAN BANK (PALAWAN DB) INC	Thrift	6.86
STERLING BANK OF ASIA INC (A SAVINGS BANK)	Thrift	7.23
BPI GLOBE BANKO INC A SAVINGS BANK	Thrift	7.27
COMSAVINGS BANK	Thrift	7.27
PHIL BANK OF COMMUNICATIONS	U/KB	7.98
WORLD PARTNERS BANK (A THRIFT BANK)	Thrift	9.48
RIZAL COMM'L BANKING CORP	U/KB	9.96
METROPOLITAN BANK & TCO	U/KB	10.35
UNITED COCONUT PLANTERS BANK	U/KB	10.46
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	10.66
EAST WEST BANKING CORP	U/KB	10.76
ALLIED SAVINGS BANK	Thrift	11.45
MIZUHO BANK LTD - MANILA BRANCH	U/KB	11.47
CITY SAVINGS BANK INC	Thrift	11.73
RCBC SAVINGS BANK INC	Thrift	11.77
LAND BANK OF THE PHILIPPINES	U/KB	12.06
BDO UNIBANK INC	U/KB	12.10
PHIL NATIONAL BANK	U/KB	12.42
SECURITY BANK CORP	U/KB	12.43
UNION BANK OF THE PHILS	U/KB	12.48
PHIL SAVINGS BANK	Thrift	12.59
PHIL POSTAL SAVINGS BANK INC	Thrift	12.84
STANDARD CHARTERED BANK	U/KB	13.21
CHINA BANK SAVINGS INC	Thrift	13.22
LUZON DEVELOPMENT BANK	Thrift	13.31
BPI FAMILY SAVINGS BANK INC	Thrift	13.35
BANK OF THE PHIL ISLANDS	U/KB	13.43
DEVELOPMENT BANK OF THE PHIL	U/KB	13.55
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	Thrift	13.85
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS	Thrift	14.55
ASIA UNITED BANK CORPORATION	U/KB	15.80
FARMERS SAVINGS & LOAN BANK INC	Thrift	15.90
CHINA BANKING CORP	U/KB	16.12
HONGKONG & SHANGHAI BANKING CORP	U/KB	16.58
VILLAGE BANK INC (A THRIFT BANK)	Thrift	16.58
MAYBANK PHILIPPINES INC	U/KB	17.11
LEGAZPI SAVINGS BANK INC	Thrift	17.13
MALAYAN BANK SAVINGS AND MORT BANK INC	Thrift	17.30
PRODUCERS SAVINGS BANK CORPORATION	Thrift	17.78
HIYAS BANKING CORPORATION	Thrift	17.83
ROBINSONS BANK CORPORATION	U/KB	19.04
BATAAN DEVELOPMENT BANK	Thrift	19.58
BPI DIRECT SAVINGS BANK INC	Thrift	19.85
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	Thrift	20.48
CITIBANK, N.A.	U/KB	20.63
PHILIPPINE VETERANS BANK	U/KB	20.95
ANZ BANKING GROUP LTD	U/KB	21.51
BANK OF CHINA LIMITED-MANILA BRANCH	U/KB	22.06
BANK OF COMMERCE	U/KB	22.55
DEUTSCHE BANK AG	U/KB	22.60
UCPB SAVINGS BANK	Thrift	23.58
DUMAGUETE CITY DEV BANK INC	Thrift	24.59
FIRST CONSOLIDATED BANK INC (A PDB)	Thrift	25.33
METRO CEBU PUBLIC SAVINGS BANK	Thrift	25.75
BDO PRIVATE BANK, INC.	U/KB	26.04
CTBC BANK (PHILIPPINES) CORP	U/KB	26.42
CITIBANK SAVINGS INC	Thrift	27.06
MICROFINANCE MAXIMUM SB INC	Thrift	27.08
CITYSTATE SAVINGS BANK INC	Thrift	28.20
HSBC SAVINGS BANK(PHILS) INC	Thrift	28.65
LIFE SAVINGS BANK INC	Thrift	29.02
NORTHPOINT DEV'T BANK INC	Thrift	29.16
CORDILLERA SAVINGS BANK INC	Thrift	32.26
KOREA EXCHANGE BANK	U/KB	33.19
PHIL TRUST COMPANY	U/KB	35.27
SUN SAVINGS BANK INC	Thrift	35.95
THE BNK OF TOKYO-MITSUBISHI UFJ LTD	U/KB	36.97
LEMERY SAVINGS & LOAN BANK, INC.	Thrift	37.42
MALASIQUI PROGRESSIVE SLB, INC	Thrift	42.93
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	Thrift	43.53
TONGYANG SAVINGS BANK INC	Thrift	43.86
DUNGGANON BANK (A MICROFINANCE THRIFT BANK) INC	Thrift	44.25
MEGA INT'L COMM'L BANK CO LTD	U/KB	52.81
OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE THRIFT BANK)	Thrift	55.17
PACIFIC ACE SAVINGS BANK INC	Thrift	55.44
SAMPAGUITA SAVINGS BANK INC	Thrift	56.03
BANK OF AMERICA N.A.	U/KB	56.98
BANK ONE SAVINGS AND TRUST CORP.	Thrift	57.24
QUEZON COCONUT BANK INC (A THRIFT BANK)	Thrift	58.85
JP MORGAN CHASE BANK NATIONAL ASSN.	U/KB	59.05
MERCHANTS SAVINGS & LOAN ASSN INC	Thrift	62.04
PROGRESS SAVINGS AND LOAN BANK INC	Thrift	62.61
PRIDE STAR DEVELOPMENT BANK INC	Thrift	72.39
INTERNATIONALE NEDERLANDEN GROEP BK	U/KB	84.23
CENTURY SAVINGS BANK CORPORATION	Thrift	88.40
BANGKOK BANK PUBLIC CO LTD	U/KB	89.85
TOWER DEVELOPMENT BANK	Thrift	110.91
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	U/KB	116.58
PAMPANGA DEVELOPMENT BANK	Thrift	121.84
UNIVERSITY SAVINGS BANK INC	Thrift	140.47
UNITED OVERSEAS BANK PHILIPPINES	Thrift	162.10
ISLA BANK(A THRIFT BANK) INC	Thrift	183.37
CARD SME BANK INC A THRIFT BANK	Thrift	296.37
BDO ELITE SAVINGS BANK INC	Thrift	401.25

Philippine Banking System
Common Tier 1 Ratio
June 30, 2014
Bank	Type of Bank	Common Tier 1 Ratio
ROBINSONS BANK CORPORATION	U/KB	-1.76
1ST VALLEY BANK INC A DEVELOPMENT BANK	Thrift	0.00
BANK OF AMERICA N.A.	U/KB	0.00
BANK OF CHINA LIMITED-MANILA BRANCH	U/KB	0.00
BANK ONE SAVINGS AND TRUST CORP.	Thrift	0.00
BATAAN DEVELOPMENT BANK	Thrift	0.00
BATAAN SAVINGS AND LOAN BANK	Thrift	0.00
BUSINESS AND CONSUMERS BANK (A DB)	Thrift	0.00
CARD SME BANK INC A THRIFT BANK	Thrift	0.00
CENTURY SAVINGS BANK CORPORATION	Thrift	0.00
CITYSTATE SAVINGS BANK INC	Thrift	0.00
COMSAVINGS BANK	Thrift	0.00
CORDILLERA SAVINGS BANK INC	Thrift	0.00
DUMAGUETE CITY DEV BANK INC	Thrift	0.00
DUNGGANON BANK (A MICROFINANCE THRIFT BANK) INC	Thrift	0.00
ENTERPRISE BANK INC (A THRIFT BANK)	Thrift	0.00
EQUICOM SAVINGS BANK INC	Thrift	0.00
FARMERS SAVINGS & LOAN BANK INC	Thrift	0.00
FIRST CONSOLIDATED BANK INC (A PDB)	Thrift	0.00
HIYAS BANKING CORPORATION	Thrift	0.00
INTER-ASIA DEVELOPMENT BANK	Thrift	0.00
ISLA BANK(A THRIFT BANK) INC	Thrift	0.00
LEGAZPI SAVINGS BANK INC	Thrift	0.00
LEMERY SAVINGS & LOAN BANK, INC.	Thrift	0.00
LIFE SAVINGS BANK INC	Thrift	0.00
LUZON DEVELOPMENT BANK	Thrift	0.00
MALASIQUI PROGRESSIVE SLB, INC	Thrift	0.00
MALAYAN BANK SAVINGS AND MORT BANK INC	Thrift	0.00
MARITIME SAVINGS BANK CORPORATION	Thrift	0.00
MERCHANTS SAVINGS & LOAN ASSN INC	Thrift	0.00
METRO CEBU PUBLIC SAVINGS BANK	Thrift	0.00
MICROFINANCE MAXIMUM SB INC	Thrift	0.00
MIZUHO BANK LTD - MANILA BRANCH	U/KB	0.00
NORTHPOINT DEV'T BANK INC	Thrift	0.00
OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE THRIFT BANK)	Thrift	0.00
OPTIMUM DEVELOPMENT BANK INC	Thrift	0.00
PACIFIC ACE SAVINGS BANK INC	Thrift	0.00
PAMPANGA DEVELOPMENT BANK	Thrift	0.00
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	Thrift	0.00
PHIL BANK OF COMMUNICATIONS	U/KB	0.00
PHIL POSTAL SAVINGS BANK INC	Thrift	0.00
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	Thrift	0.00
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS	Thrift	0.00
PRIDE STAR DEVELOPMENT BANK INC	Thrift	0.00
PRODUCERS SAVINGS BANK CORPORATION	Thrift	0.00
PROGRESS SAVINGS AND LOAN BANK INC	Thrift	0.00
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	Thrift	0.00
QUEZON COCONUT BANK INC (A THRIFT BANK)	Thrift	0.00
RCBC SAVINGS BANK INC	Thrift	0.00
SAMPAGUITA SAVINGS BANK INC	Thrift	0.00
STANDARD CHARTERED BANK	U/KB	0.00
STERLING BANK OF ASIA INC (A SAVINGS BANK)	Thrift	0.00
SUN SAVINGS BANK INC	Thrift	0.00
THE BNK OF TOKYO-MITSUBISHI UFJ LTD	U/KB	0.00
THE PALAWAN BANK (PALAWAN DB) INC	Thrift	0.00
TONGYANG SAVINGS BANK INC	Thrift	0.00
TOWER DEVELOPMENT BANK	Thrift	0.00
UCPB SAVINGS BANK	Thrift	0.00
UNITED OVERSEAS BANK PHILIPPINES	Thrift	0.00
UNIVERSITY SAVINGS BANK INC	Thrift	0.00
VILLAGE BANK INC (A THRIFT BANK)	Thrift	0.00
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	0.00
WORLD PARTNERS BANK (A THRIFT BANK)	Thrift	0.00
PLANTERS DEVELOPMENT BANK	Thrift	2.64
BPI GLOBE BANKO INC A SAVINGS BANK	Thrift	7.27
RIZAL COMM'L BANKING CORP	U/KB	9.96
METROPOLITAN BANK & TCO	U/KB	10.35
UNITED COCONUT PLANTERS BANK	U/KB	10.46
EAST WEST BANKING CORP	U/KB	10.76
ALLIED SAVINGS BANK	Thrift	11.45
BDO UNIBANK INC	U/KB	11.62
LAND BANK OF THE PHILIPPINES	U/KB	12.07
PHIL NATIONAL BANK	U/KB	12.42
SECURITY BANK CORP	U/KB	12.43
UNION BANK OF THE PHILS	U/KB	12.48
PHIL SAVINGS BANK	Thrift	12.59
CITY SAVINGS BANK INC	Thrift	12.77
CHINA BANK SAVINGS INC	Thrift	13.21
BPI FAMILY SAVINGS BANK INC	Thrift	13.35
BANK OF THE PHIL ISLANDS	U/KB	13.43
DEVELOPMENT BANK OF THE PHIL	U/KB	13.55
ASIA UNITED BANK CORPORATION	U/KB	15.80
CHINA BANKING CORP	U/KB	16.12
HONGKONG & SHANGHAI BANKING CORP	U/KB	16.58
MAYBANK PHILIPPINES INC	U/KB	17.11
PHILIPPINE VETERANS BANK	U/KB	19.37
BPI DIRECT SAVINGS BANK INC	Thrift	19.85
BDO PRIVATE BANK, INC.	U/KB	20.19
CITIBANK, N.A.	U/KB	20.64
ANZ BANKING GROUP LTD	U/KB	21.51
BANK OF COMMERCE	U/KB	22.55
DEUTSCHE BANK AG	U/KB	22.60
CTBC BANK (PHILIPPINES) CORP	U/KB	26.42
CITIBANK SAVINGS INC	Thrift	27.06
HSBC SAVINGS BANK(PHILS) INC	Thrift	28.65
KOREA EXCHANGE BANK	U/KB	33.19
PHIL TRUST COMPANY	U/KB	35.27
MEGA INT'L COMM'L BANK CO LTD	U/KB	52.81
JP MORGAN CHASE BANK NATIONAL ASSN.	U/KB	59.05
INTERNATIONALE NEDERLANDEN GROEP BK	U/KB	84.23
BANGKOK BANK PUBLIC CO LTD	U/KB	89.85
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	U/KB	116.58
BDO ELITE SAVINGS BANK INC	Thrift	401.25

Source: www.bsp.gov.ph

The Philippine Consumer Has Not Peaked - Yet

Quite a few previous blog posts have detailed how the Philippine Real Estate Market may have already peaked in terms of sales volume and loans to the residential real estate sector.  The Philippine Real Estate Market has yet to peak in terms of price, although some of our ASEAN neighbors have already showed signs of plateauing to declining prices for residential real estate, notably including Singapore and Malaysia.

The two charts below indicate a slowdown in terms of loan growth in the real estate sector.

Since home prices have still continued their relentless climb, this  has not yet translated to a sharp uptick in Non-Performing Loans (NPLs) in the sector.

However, there was a slight uptick in NPLs from 3.15% of residential real estate loans in 2013 to 3.34% as of March 2014.

Negative Real Interest Rates

The persistence of negative real interest rates in the Philippines has led, unsurprisingly, to a sharp drop in Gross Domestic Savings Rate as a percentage of GDP since 2010.

Uptick in Consumer Loans

With negative real interest rates, it makes sense for consumers to buy tangible goods, such as real estate and cars, as a store of value.  Correspondingly, there was a sharp uptick in total consumer loans both as a percentage of GDP and as a percentage of the Total Loan Portfolio.

The uptick seems to have leveled off since 2012. Most of the increase, it seems, can be attributed to residential real estate loans and auto loans.  Again, the leveling off has not yet translated to any notable increase in consumer loan NPLs - yet.

Another Sign that the Philippine Real Estate Bubble May Have Already Peaked?

In a technical analysis of the price trends of financial securities, volume is a very important technical indicator. If the volume moves with the trend, the volume confirms the trend. When price and volume diverge, it is often indicative of a shift in the trend. For example, if an uptrending stock price is accompanied by lower and lower volumes, it may indicate that the price trend is weak and that prices may start to decline.

The same holds true for the real estate market.

US Real Estate Market

In the US, sales volumes peaked for US Total Home Sales (New and Existing Home Sales) at 8,4 million homes in 2005, a year before the US Median Sales Price peaked at US$ 225K in 2006.  By 2007, the US Median Sales Price slipped by only 1% to US$ 223K while sales volumes had already dropped an astonishing 30.58% from the peak sales volume in 2005, to 5.8 million in 2007.

From then on, the US Median Sales Prices continued to decline year after year, bottoming out at $170K in 2011, or some 25% below the peak price level.  By then sales volumes had already bottomed out a year earlier in 2010 to 4.5 million homes, or some 46% below peak volumes.

Sources: Realtor.org, St. Louis Fed

Median Sales Price is a weighted average of the median sales prices of New Home Sales and Existing Home Sales

The same dynamic played out in both segments of the US Residential Real Estate Market: New Home Sales and Existing Home Sales.

Here is the chart for New Home Sales:

And here is the chart for Existing Home Sales, the much larger market segment.

Philippine Real Estate Market

Might the same dynamic be playing out in the Philippine residential real estate market?  One problem bedevilling such an analysis is the dearth of data.

To my knowledge, the Philippines does not have adequate market data.  For instance, there seem to be no published figures for sales volumes for residential homes.  The best approximation of such data is HLURB's statistics for licenses to sell residential homes.  This statistic represents only new homes and only represents licenses to sell for each residential unit and not the actual sales volumes.

Another issue is that there seems to be no price data on residential sales.  The best data is assembled here, which in turn, is assembled from the Philippine Office of Colliers International, a global real estate agency.  These prices, in turn, are based on the average prices of a prime 3 bedroom condominium unit in the heart of the Makati Central Business District.  This is like basing nationwide US housing prices on the price of a prime 3 bedroom coop unit in Manhattan in New York, one of the priciest real estate markets in the US.  The data available in the Philippines is not representative of the true state of the entire national residential real estate market.  At best, it is an approximation of the Philippine Real Estate Market.  The BSP has stepped into the picture to overcome this deficiency by developing their own real estate index, which would be more comprehensive in scope. Here is a possible candidate for such an index.

But based on the data available, we arrived at this chart:

Based on this data, volumes (as indicated by Residential HLURB licenses to sell) may have already peaked in 2012, while prices have continued their upward climb to date.  Volume seems to have peaked at 264,237 units in 2012 and dropped 15% to 225,051 units in 2013.  In the first quarter of 2014, volumes declined further on an annualized basis, to just 189,668 units or 28% below peak volumes. 

Prices though, have continued to climb since 2012, another 14% in 2013 and another 2% in the first quarter of 2014, representing a 16% increase over 2012 prices.

Is the same dynamic that played out in the US Residential Real Estate Market playing out in the Philippines?  It looks like it, but it may still be too early to tell.