The Top Distressed Philippine Banks as of June 30, 2017

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

This is a list of the top distressed Universal and Commercial (U/KB) as well as Thrift Banks in the Philippines as of June 30, 2017.  It updates a previous blog post: "The Top Distressed Philippine Banks as of March 31, 2017".

To see where your bank stands relative to these banks, please check the previous blog post: "Philippine Banks Deteriorate Slightly in the 2nd Qtr of 2017"

The list of Philippine Banks classified as distressed as of June 30, 2017 are as follows:

1. Bank of China Limited - Manila Branch (Distressed Ratio of 506.89%)
2. Inter-Asia Development Bank (Distressed Ratio of 394.27%)
3. United Coconut Planters Bank (Distressed Ratio of 312.46%)
4. Philippine Postal Savings Bank Inc (Distressed Ratio of 234.61%)
5. Village Bank Inc (Distressed Ratio of 182.34%)
6. Philippine Resources Savings Banking Corporation (Distressed Ratio of 177.06%)
7. Luzon Development Bank (Distressed Ratio of 167.83%)
8. Malayan Bank Savings and Mortgage Bank Inc (Distressed Ratio of 160.21%)
9. Enterprise Bank Inc (Distressed Ratio of 144.09%)
10. Yuanta Savings Bank Philippines (Distressed Ratio of 132.58%)
11. World Partners Bank (Distressed Ratio of 124.67%)
12. China Bank Savings Inc (Distressed Ratio of 122.82%)
13. Bataan Development Bank (Distressed Ratio of 110.43%)
14. Philippine Veterans Bank (Distressed Ratio of 101.56%)
15. Deutsche Bank AG (Distressed Ratio of 100.78%)

Source: www.bsp.gov.ph

Disclaimer:

This list only serves as a screening guide.  It is not a definitive guide and must be taken in the context of other factors.  The figures are based on the individual banks' statement of condition as of June 30, 2017 as published in the BSP website (www.bsp.gov.ph). For this analysis, no attempt was made to go through the audited financial statements of each bank. Readers are suggested to make their own investigations and verify the figures presented. Both BSP and PDIC have their own problem bank screening systems that are much more sophisticated in scope and design, given that they have more access to information over the banks they regulate.

Philippine Banks Deteriorate Slightly in the 2nd Qtr. of 2017

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  



Based on the individual Published Statements of Condition for the Philippine Banking Industry (from www.bsp.gov.ph), Total Distressed Assets of Philippine Banks increased by Php 15.70 billion or 2.45% from March 31, 2017 to June 30, 2017.  This increase was partially offset by the increase of their Total Capital Cushion of Php 2.48 billion or 0.15% during the same period. As a result, the Ratio of Total Distressed Assets to Total Capital Cushion of Philippine Commercial Banks increased slightly by 0.87%, from 37.80% as of March 31 to 38.67% as of June 30, 2017. On a year on year basis, the Distressed Asset Ratio has dropped 7.91% from 41.99% as of June 30, 2017 to just 38.67% as of June 30, 2017.

Those banks that posted significant improvements (25% or more) in this ratio include (Distressed banks are highlighted in yellow, failed banks are highlighted in red):

1. Mega International Commercial Bank Co Ltd (92.53% decrease)
2. Industrial Bank of Korea Manila Branch (83.18% decrease)
3. Metro Cebu Public Savings Bank (82.50% decrease)
4. ING Bank N.V. (70.48% decrease)
5. Al-Amanah Islamic Investment Bank of the Philippines (56.66% decrease)
6. World Partners Bank (53.84% decrease)
7. Mizuho Bank Ltd (43.10% decrease)
8. Standard Chartered Bank (40.19% decrease)
9. University Savings Bank (37.13% decrease)
10. China Banking Corporation (27.77% decrease)

The banks that exhibited significant deterioration (25% or more) in this ratio include:

1. Bank of America N.A. (116.39% increase)
2. Deutsche Bank AG (104.75% increase)
3. Farmers Savings & Loan Bank Inc (56.61% increase)
4. Sumitomo Mitsui Banking Corporation - Manila Branch (52.21% increase)
5. Philippine Resources Savings Banking Corporation (51.02% increase)
6. Sun Savings Bank Inc. (45.69% increase)
7. United Overseas Bank Limited - Manila Branch (38.23% increase)
8. Wealth Development Bank Corporation (28.62% increase)
9. Northpoint Development Bank Inc (27.44% increase)

Distressed Banks

The list of Philippine Banks classified as distressed as of June 30, 2017 are as follows:

1. Bank of China Limited - Manila Branch (Distressed Ratio of 506.89%)
2. Inter-Asia Development Bank (Distressed Ratio of 394.27%)
3. United Coconut Planters Bank (Distressed Ratio of 312.46%)
4. Philippine Postal Savings Bank Inc (Distressed Ratio of 234.61%)
5. Village Bank Inc (Distressed Ratio of 182.34%)
6. Philippine Resources Savings Banking Corporation (Distressed Ratio of 177.06%)
7. Luzon Development Bank (Distressed Ratio of 167.83%)
8. Malayan Bank Savings and Mortgage Bank Inc (Distressed Ratio of 160.21%)
9. Enterprise Bank Inc (Distressed Ratio of 144.09%)
10. Yuanta Savings Bank Philippines (Distressed Ratio of 132.58%)
11. World Partners Bank (Distressed Ratio of 124.67%)
12. China Bank Savings Inc (Distressed Ratio of 122.82%)
13. Bataan Development Bank (Distressed Ratio of 110.43%)
14. Philippine Veterans Bank (Distressed Ratio of 101.56%)
15. Deutsche Bank AG (Distressed Ratio of 100.78%)

As a group, the distressed banks showed a slight improvement in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 204.52% as of June 30, 2017, down from 221.52% as of March 31, 2017.  

Arrivals

1. Philippine Veterans Bank entered the Distressed Banks list with a Distressed Ratio of 101.56% as of June 30, 2017 from a Distressed Ratio of just 94.63% as of March 31, 2017.
2. Deutsche Bank AG entered the Distressed Banks list with a Distressed Ratio of 100.78% as of June 30, 2017 from a Distressed Ratio of just 49.22% as of March 31, 2017.

Departures

1. Equicom Savings Bank Inc left the Distressed Banks list with a Distressed Ratio of 99.37% as of June 30, 2017 from a Distressed Ratio of 103.89% as of March 31, 2017.
2. Legazpi Savings Bank left the Distressed Banks list with a Distressed Ratio of 90.51% as of June 30, 2017 from a Distressed Ratio of 104.43% as of March 31, 2017.

Philippine Banking System
Total Distressed Assets/ Total Capital Cushion
March 31, 2017 to June 30, 2017
In %
Bank	June 30, 2017	March 31, 2017	Variance	% Variance
BANK OF AMERICA N.A.	1.33%	0.62%	0.72%	116.39%
DEUTSCHE BANK AG	100.78%	49.22%	51.56%	104.75%
FARMERS SAVINGS & LOAN BANK INC	29.39%	18.77%	10.63%	56.61%
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	0.72%	0.47%	0.25%	52.21%
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS BANK)	177.06%	117.24%	59.82%	51.02%
SUN SAVINGS BANK INC	25.40%	17.44%	7.97%	45.69%
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	0.31%	0.23%	0.09%	38.23%
WEALTH DEVELOPMENT BANK CORPORATION	38.29%	29.77%	8.52%	28.62%
NORTHPOINT DEV'T BANK INC	43.65%	34.25%	9.40%	27.44%
CITY SAVINGS BANK INC	53.80%	43.68%	10.13%	23.19%
BANK OF THE PHIL ISLANDS	25.86%	21.05%	4.80%	22.82%
CARD SME BANK INC A THRIFT BANK	29.74%	24.50%	5.24%	21.39%
THE BNK OF TOKYO-MITSUBISHI UFJ LTD	2.85%	2.36%	0.49%	20.69%
ISLA BANK(A THRIFT BANK) INC	3.88%	3.27%	0.61%	18.64%
UNITED COCONUT PLANTERS BANK	312.46%	264.85%	47.61%	17.98%
YUANTA SAVINGS BANK PHILIPPINES INC	132.58%	112.78%	19.79%	17.55%
HONGKONG & SHANGHAI BANKING CORP	27.18%	23.15%	4.03%	17.41%
LAND BANK OF THE PHILIPPINES	34.36%	29.36%	5.00%	17.03%
BANGKOK BANK PUBLIC CO LTD	4.05%	3.52%	0.53%	15.13%
BPI DIRECT BANKO INC A SAVINGS BANK	43.35%	38.04%	5.30%	13.94%
PNB SAVINGS BANK	16.34%	14.63%	1.72%	11.74%
CITIBANK, N.A.	52.00%	46.56%	5.43%	11.67%
BUSINESS AND CONSUMERS BANK (A DB)	21.11%	18.91%	2.21%	11.66%
RIZAL COMM'L BANKING CORP	25.64%	22.98%	2.66%	11.59%
BANK ONE SAVINGS AND TRUST CORP.	44.85%	40.49%	4.36%	10.77%
METROPOLITAN BANK & TCO	31.60%	28.72%	2.88%	10.02%
ENTERPRISE BANK INC (A THRIFT BANK)	144.09%	131.58%	12.51%	9.51%
1ST VALLEY BANK INC A DEVELOPMENT BANK	36.70%	33.78%	2.92%	8.65%
BDO PRIVATE BANK, INC.	49.01%	45.13%	3.88%	8.59%
PHILIPPINE VETERANS BANK	101.56%	94.63%	6.93%	7.32%
VILLAGE BANK INC (A THRIFT BANK)	182.34%	173.15%	9.19%	5.31%
EAST WEST BANKING CORP	71.78%	68.49%	3.29%	4.80%
PHIL SAVINGS BANK	75.88%	72.43%	3.46%	4.77%
DEVELOPMENT BANK OF THE PHIL	43.52%	41.55%	1.96%	4.72%
MALAYAN BANK SAVINGS AND MORT BANK INC	160.21%	153.98%	6.23%	4.05%
BPI FAMILY SAVINGS BANK INC	47.66%	45.82%	1.84%	4.02%
INTER-ASIA DEVELOPMENT BANK	394.27%	379.60%	14.67%	3.86%
CENTURY SAVINGS BANK CORPORATION	16.36%	15.79%	0.57%	3.61%
ASIA UNITED BANK CORPORATION	39.19%	38.15%	1.04%	2.74%
BDO UNIBANK INC	24.83%	24.23%	0.60%	2.47%
HIYAS BANKING CORPORATION	36.22%	35.36%	0.85%	2.41%
PHIL NATIONAL BANK	54.71%	53.56%	1.15%	2.16%
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	39.35%	38.61%	0.74%	1.92%
PHIL TRUST COMPANY	39.32%	38.59%	0.73%	1.89%
SECURITY BANK CORP	13.92%	13.66%	0.26%	1.89%
ROBINSONS BANK CORPORATION	64.47%	63.30%	1.17%	1.84%
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	64.40%	63.33%	1.07%	1.69%
STERLING BANK OF ASIA INC (A SAVINGS BANK)	51.93%	51.08%	0.85%	1.67%
PAMPANGA DEVELOPMENT BANK	37.31%	36.88%	0.42%	1.15%
FIRST CONSOLIDATED BANK INC (A PDB)	30.35%	30.07%	0.28%	0.94%
SHINHAN BANK - MANILA BRANCH	1.35%	1.34%	0.01%	0.70%
UCPB SAVINGS BANK	79.86%	79.47%	0.39%	0.49%
MERCHANTS SAVINGS & LOAN ASSN INC	6.77%	6.74%	0.03%	0.41%
BANK OF MAKATI (A SAVINGS BANK) INC	51.83%	51.81%	0.03%	0.05%
BATAAN DEVELOPMENT BANK	110.43%	110.58%	-0.15%	-0.14%
BATAAN SAVINGS AND LOAN BANK	3.47%	3.47%	-0.01%	-0.15%
LEMERY SAVINGS & LOAN BANK, INC.	15.36%	15.45%	-0.09%	-0.58%
MALASIQUI PROGRESSIVE SLB, INC	22.45%	22.59%	-0.14%	-0.63%
CORDILLERA SAVINGS BANK INC	42.58%	43.12%	-0.54%	-1.26%
MAYBANK PHILIPPINES INCORPORATED	72.52%	73.75%	-1.23%	-1.67%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	36.94%	37.58%	-0.64%	-1.70%
CTBC BANK (PHILIPPINES) CORP	19.15%	19.49%	-0.35%	-1.78%
CATHAY UNITED BANK CO LTD - MANILA BRANCH	0.48%	0.49%	-0.01%	-1.84%
DUMAGUETE CITY DEV BANK INC	53.84%	55.03%	-1.19%	-2.16%
PHIL POSTAL SAVINGS BANK INC	234.61%	239.91%	-5.30%	-2.21%
CITYSTATE SAVINGS BANK INC	52.40%	53.70%	-1.29%	-2.41%
UNION BANK OF THE PHILS	58.86%	61.06%	-2.20%	-3.60%
EQUICOM SAVINGS BANK INC	99.37%	103.89%	-4.51%	-4.35%
BANK OF COMMERCE	72.61%	75.94%	-3.33%	-4.38%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT BANK)	53.82%	56.73%	-2.91%	-5.13%
QUEZON COCONUT BANK INC (A THRIFT BANK)	23.23%	24.64%	-1.41%	-5.72%
KEB HANA BANK - MANILA BRANCH	10.43%	11.11%	-0.68%	-6.15%
FIRST COMMERCIAL BANK LTD MANILA BRANCH	0.50%	0.53%	-0.03%	-6.46%
THE PALAWAN BANK (PALAWAN DB) INC	68.93%	73.79%	-4.85%	-6.58%
PHIL BANK OF COMMUNICATIONS	71.09%	76.20%	-5.11%	-6.70%
LUZON DEVELOPMENT BANK	167.83%	182.24%	-14.41%	-7.91%
CHINA BANK SAVINGS INC	122.82%	133.90%	-11.08%	-8.27%
RCBC SAVINGS BANK INC	72.52%	79.42%	-6.89%	-8.68%
PRODUCERS SAVINGS BANK CORPORATION	52.61%	58.40%	-5.79%	-9.92%
HSBC SAVINGS BANK (PHILS) INC	10.11%	11.22%	-1.12%	-9.96%
ANZ BANKING GROUP LTD	28.66%	31.92%	-3.26%	-10.23%
MARITIME SAVINGS BANK CORPORATION	78.00%	86.89%	-8.89%	-10.23%
PHIL STAR DEVELOPMENT BANK INC	26.55%	29.60%	-3.05%	-10.30%
LEGAZPI SAVINGS BANK INC	90.51%	104.43%	-13.92%	-13.33%
LIFE SAVINGS BANK INC	24.95%	29.74%	-4.79%	-16.12%
BANK OF CHINA LIMITED-MANILA BRANCH	506.89%	607.39%	-100.49%	-16.55%
OPTIMUM DEVELOPMENT BANK INC	27.77%	34.37%	-6.60%	-19.21%
JP MORGAN CHASE BANK NATIONAL ASSN.	19.92%	25.31%	-5.39%	-21.29%
CHINA BANKING CORP	24.24%	33.55%	-9.32%	-27.77%
UNIVERSITY SAVINGS BANK INC	34.18%	54.37%	-20.19%	-37.13%
STANDARD CHARTERED BANK	54.41%	90.96%	-36.55%	-40.19%
MIZUHO BANK LTD - MANILA BRANCH	3.07%	5.40%	-2.33%	-43.10%
WORLD PARTNERS BANK (A THRIFT BANK)	124.67%	270.09%	-145.42%	-53.84%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	6.25%	14.43%	-8.17%	-56.66%
ING BANK N.V.	27.24%	92.28%	-65.04%	-70.48%
METRO CEBU PUBLIC SAVINGS BANK	16.01%	91.48%	-75.47%	-82.50%
INDUSTRIAL BANK OF KOREA MANILA BRANCH	0.46%	2.75%	-2.29%	-83.18%
MEGA INT'L COMM'L BANK CO LTD	1.27%	16.95%	-15.68%	-92.53%
MICROFINANCE MAXIMUM SB INC	NA	380.34%	NA	NA
PACIFIC ACE SAVINGS BANK INC	13.34%	NA	NA	NA
Grand Total	38.67%	37.80%	0.87%	2.29%

Source: www.bsp.gov.ph

Disclaimer:

This list only serves as a screening guide.  It is not a definitive guide and must be taken in the context of other factors.  The figures are based on the individual banks' statement of condition as of March 31, 2017 and June 30, 2017 as published in the BSP website (www.bsp.gov.ph). For this analysis, no attempt was made to go through the audited financial statements of each bank. Readers are suggested to make their own investigations and verify the figures presented. Both BSP and PDIC have their own problem bank screening systems that are much more sophisticated in scope and design, given that they have more access to information over the banks they regulate.

Overstated Capital of Philippine Banks as of June 30, 2017

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 Stockholder's Equity (SE) and Retained Earnings (RE) 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, six banks have Deferred Charges as of June 30, 2017:

1. Bataan Development Bank (Deferred Charges of 7.12% of SE)
2. City Savings Bank (Deferred Charges of 6.00% of SE)
3. China Bank Savings Inc (Deferred Charges of 3.13 of SE)
4. Bank of Commerce (Deferred Charges of 0.53% of SE)
5. Card SME Bank, Inc. (Deferred Charges of 0.222% of SE)
6. Wealth Development Bank Corporation (Deferred Charges of 0.06% of SE)

United Coconut Planters Bank, long a mainstay on this list, no longer had Deferred Charges as of June 30, 2017.

It must be noted that three of these banks were ranked as  distressed (highlighted in yellow) as of March 31, 2017:

1. China Bank Savings (Distressed Ratio of 133.90%)
2. Bataan Development Bank (Distressed Ratio of 110.58%)

For more information on distressed banks, please see the previous blog post: "The Top Distressed Philippine Banks as of March 31, 2017.



Retained Earnings

Only four banks have sufficient Retained Earnings (RE) to absorb their unbooked losses as of June 30, 2017:

1. Bataan Development Bank (33.25% of RE)
2. City Savings Bank (7.73% of RE)
3. Wealth Development Bank Corporation (5.58% of RE)
4. CARD SME Bank (1.93% of RE)

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

1. Bank of Commerce (Retained Earnings of - Php 592.53 million vs. Deferred Charges of Php 82.40 million).
2. China Bank Savings (Retained Earnings of - Php 1.36 billion vs. Deferred Charges of Php 284.21 million)

Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Stockholder's Equity
In Php
June 30, 2017
Bank	Type of Bank	Deferred Charges	Unbooked Losses	Total Deferred Charges	Stockholder's Equity	Adjusted SE	Impact on SE
BATAAN DEVELOPMENT BANK	Thrift	5,645,310.53	0.00	5,645,310.53	79,339,385.37	73,694,074.84	7.12%
CITY SAVINGS BANK	Thrift	717,283,734.90	0.00	717,283,734.90	11,948,734,053.08	11,231,450,318.18	6.00%
CHINA BANK SAVINGS INC	Thrift	284,206,215.57	0.00	284,206,215.57	9,092,992,464.87	8,808,786,249.30	3.13%
BANK OF COMMERCE	U/KB	82,397,952.14	0.00	82,397,952.14	15,424,614,405.04	15,342,216,452.90	0.53%
CARD SME BANK INC A THRIFT BANK	Thrift	1,734,986.96	0.00	1,734,986.96	803,246,783.04	801,511,796.08	0.22%
WEALTH DEVELOPMENT BANK CORPORATION	Thrift	855,268.23	0.00	855,268.23	1,460,127,640.46	1,459,272,372.23	0.06%
UNITED COCONUT PLANTERS BANK	U/KB	0.00	0.00	0.00	17,763,321,160.41	17,763,321,160.41	0.00%
Grand Total		1,092,123,468.33	0.00	1,092,123,468.33	56,572,375,892.27	55,480,252,423.94	1.93%

Philippine Banking System
Deferred Charges Not Yet Written Down
Impact on Retained Earnings
In Php
June 30, 2017
Bank	Total Deferred Charges	RE	Adjusted RE	Impact on RE
BATAAN DEVELOPMENT BANK	5,645,310.53	16,977,349.46	11,332,038.93	33.25%
CITY SAVINGS BANK	717,283,734.90	9,277,095,921.61	8,559,812,186.71	7.73%
WEALTH DEVELOPMENT BANK CORPORATION	855,268.23	15,339,878.33	14,484,610.10	5.58%
CARD SME BANK INC A THRIFT BANK	1,734,986.96	89,948,415.40	88,213,428.44	1.93%
UNITED COCONUT PLANTERS BANK	0.00	3,490,011,079.92	3,490,011,079.92	0.00%
BANK OF COMMERCE	82,397,952.14	-592,525,678.35	-674,923,630.49	-13.91%
CHINA BANK SAVINGS INC	284,206,215.57	-1,363,304,360.23	-1,647,510,575.80	-20.85%
Grand Total	1,092,123,468.33	10,933,542,606.14	9,841,419,137.81	9.99%

Source: www.bsp.gov.ph