Are Philippine Banks Under Provisioning Loan Losses? - As of June 30, 2018

Are Philippine banks under provisioning loan losses?
On the face of it, no.
At 1.33% as of June 30, 2018, NPLs as a percentage of Total Loan Portfolios are at historic lows.

 The NPL Coverage Ratio is near historic highs at 143.61% as of June 30, 2018.

However, NPLs can go much higher than current levels.  Over the past thirty-five years, NPLs as a percentage of Total Loan Portfolios averaged 7.97% for Philippine Universal and Commercial Banks. Moreover, Loan Loss Reserves (LLR) as a percentage of Total Loan Portfolio (TLP) have averaged 4.52% for the past thirty-five years.  As can be seen from the chart below, loan loss reserves hit a peak of 22.23% of TLP in 1986, an outlier.  Without this outlier, LLR/TLP average is 4.07% for the past thirty-five years.

As of June 30, 2018, LLR/TLP stands at 1.91%, which is below the historical average of 4.52%, indicating that Philippine banks are under-provisioning for loan losses, given historical norms. If Philippine banks were to maintain higher loan loss provisions to conform to historical averages, bank earnings will suffer but will be better provisioned for future losses.

Now, which banks have not adequately provisioned for loan losses at their current NPL levels, which are at historic lows? Those highlighted in yellow (below 80% NPL Coverage Ratio) are prime candidates.

 

Philippine Banking System
NPL Coverage Ratio
June 30, 2018
Bank	Loan Loss Provisions	Gross NPLs	NPL Coverage Ratio
ALLBANK (A THRIFT BANK) INC	33,943,161.99	134,216,215.54	25.29%
UCPB SAVINGS BANK	536,011,384.46	1,881,456,594.41	28.49%
MARITIME SAVINGS BANK CORPORATION	6,948,645.24	21,895,317.81	31.74%
PHILIPPINE RESOURCES SAVINGS BANKING	384,104,649.18	1,179,751,558.32	32.56%
PNB SAVINGS BANK	757,713,070.25	2,300,104,540.68	32.94%
ENTERPRISE BANK INC (A THRIFT BANK)	148,926,171.26	397,531,630.21	37.46%
WEALTH DEVELOPMENT BANK CORPORATION	155,823,456.99	405,053,553.43	38.47%
EQUICOM SAVINGS BANK INC	248,392,363.03	639,559,441.16	38.84%
MALASIQUI PROGRESSIVE SLB, INC	6,951,706.48	17,776,401.59	39.11%
PACIFIC ACE SAVINGS BANK INC	1,949,435.10	4,706,728.00	41.42%
1ST VALLEY BANK INC A DEVELOPMENT BANK	283,317,794.20	672,608,541.12	42.12%
STERLING BANK OF ASIA INC (A SAVINGS	713,245,697.54	1,567,148,692.24	45.51%
CHINA BANK SAVINGS INC	1,905,541,832.88	3,781,873,875.79	50.39%
UNIVERSITY SAVINGS BANK INC	44,555,430.47	86,921,859.14	51.26%
PRODUCERS SAVINGS BANK CORPORATION	208,502,774.27	384,458,590.47	54.23%
RCBC SAVINGS BANK INC	2,266,957,467.57	4,169,995,103.97	54.36%
CITYSTATE SAVINGS BANK INC	77,047,455.98	136,247,026.40	56.55%
PAMPANGA DEVELOPMENT BANK	33,789,534.28	56,036,372.72	60.30%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	2,733,679.43	4,111,569.36	66.49%
BUSINESS AND CONSUMERS BANK (A DB)	10,017,575.29	14,966,364.02	66.93%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT	28,689,168.15	42,442,605.42	67.60%
UNITED COCONUT PLANTERS BANK	3,861,794,657.80	5,637,030,450.60	68.51%
BPI FAMILY SAVINGS BANK INC	7,176,599,160.70	10,468,965,854.84	68.55%
EAST WEST BANKING CORP	6,163,885,463.22	8,947,748,783.20	68.89%
FIRST CONSOLIDATED BANK INC (A PDB)	654,503,708.14	930,922,550.94	70.31%
HIYAS BANKING CORPORATION	28,859,545.81	40,456,381.87	71.33%
CORDILLERA SAVINGS BANK INC	15,115,504.60	20,233,158.02	74.71%
UNION BANK OF THE PHILS	5,886,754,006.60	7,764,720,733.10	75.81%
STANDARD CHARTERED BANK	2,060,854,781.77	2,633,305,802.50	78.26%
PHIL SAVINGS BANK	4,393,946,529.27	5,541,695,108.80	79.29%
LEGAZPI SAVINGS BANK INC	267,915,422.76	329,578,715.05	81.29%
PHILIPPINE BUSINESS BANK INC A SAVINGS	1,564,463,062.38	1,854,076,328.08	84.38%
BATAAN DEVELOPMENT BANK	21,551,136.32	25,467,010.45	84.62%
BANK ONE SAVINGS CORPORATION	44,360,200.39	51,920,016.00	85.44%
BANK OF MAKATI (A SAVINGS BANK) INC	2,014,409,463.94	2,271,355,751.00	88.69%
ASIA UNITED BANK CORPORATION	2,707,980,036.40	3,000,943,436.40	90.24%
SUN SAVINGS BANK INC	19,004,436.35	20,766,750.32	91.51%
YUANTA SAVINGS BANK PHILIPPINES INC	105,932,765.93	114,070,749.99	92.87%
PHIL BANK OF COMMUNICATIONS	2,230,711,405.42	2,377,981,312.50	93.81%
INTER-ASIA DEVELOPMENT BANK	6,847,736.00	7,160,669.24	95.63%
PENBANK INC (A PDB) (FORMERLY: PENINSULA	122,667,240.05	127,664,962.18	96.09%
BPI DIRECT BANKO INC A SAVINGS BANK	787,492,845.37	814,235,200.14	96.72%
RIZAL COMM'L BANKING CORP	3,433,264,411.45	3,537,445,273.10	97.05%
MALAYAN BANK SAVINGS AND MORT BANK INC	361,423,970.33	369,652,752.94	97.77%
NORTHPOINT DEV'T BANK INC	118,459,622.13	112,927,580.50	104.90%
DEVELOPMENT BANK OF THE PHIL	7,345,351,988.80	6,833,844,003.90	107.48%
PHILIPPINE VETERANS BANK	2,462,760,755.53	2,244,899,440.80	109.70%
MAYBANK PHILIPPINES INCORPORATED	2,088,668,695.90	1,893,373,519.10	110.31%
MERCHANTS SAVINGS & LOAN ASSN INC	80,188,059.67	72,606,891.31	110.44%
LEMERY SAVINGS & LOAN BANK, INC.	2,374,586.45	2,090,392.45	113.60%
ROBINSONS BANK CORPORATION	872,785,890.55	758,692,635.02	115.04%
BANK OF COMMERCE	2,276,436,875.69	1,790,008,869.00	127.17%
DUMAGUETE CITY DEV BANK INC	19,299,237.59	14,935,890.88	129.21%
PHIL NATIONAL BANK	12,466,978,484.90	8,855,596,734.50	140.78%
LAND BANK OF THE PHILIPPINES	13,933,110,440.10	9,702,134,275.60	143.61%
CTBC BANK (PHILIPPINES) CORP	761,964,752.87	496,519,465.43	153.46%
FARMERS SAVINGS & LOAN BANK INC	26,635,401.48	16,432,486.76	162.09%
BANK OF THE PHIL ISLANDS	17,231,821,061.20	10,576,324,545.00	162.93%
CARD SME BANK INC A THRIFT BANK	160,862,682.64	98,098,716.66	163.98%
CHINA BANKING CORP	5,546,148,140.10	3,199,071,460.70	173.37%
CENTURY SAVINGS BANK CORPORATION	19,537,665.62	10,875,949.65	179.64%
BDO UNIBANK INC	32,288,167,672.00	17,834,422,711.00	181.04%
LIFE SAVINGS BANK INC	5,424,695.67	2,830,739.19	191.64%
METRO CEBU PUBLIC SAVINGS BANK	18,669,869.21	9,340,189.11	199.89%
METROPOLITAN BANK & TCO	17,584,868,216.20	7,598,997,495.60	231.41%
SECURITY BANK CORP	6,170,190,831.40	2,264,379,743.30	272.49%
PHIL TRUST COMPANY	3,241,974,941.72	1,119,876,214.30	289.49%
HSBC SAVINGS BANK(PHILS) INC	110,492,201.78	34,454,464.98	320.69%
HONGKONG & SHANGHAI BANKING CORP	1,752,444,541.53	501,255,503.13	349.61%
QUEZON COCONUT BANK INC (A THRIFT BANK)	1,433,319.51	409,148.47	350.32%
KEB HANA BANK - MANILA BRANCH	86,823,705.95	23,050,214.36	376.67%
CITIBANK, N.A.	3,965,629,763.80	982,359,482.14	403.68%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK	23,456,387.15	5,386,169.19	435.49%
BANGKOK BANK PUBLIC CO LTD	431,981,327.30	28,260,972.33	1528.54%
ING BANK N.V.	109,725,921.33	108.68	100962386.21%
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED	92,198,639.03	0.00	NA
BANK OF AMERICA N.A.	10,539,078.03	0.00	NA
BANK OF CHINA LIMITED-MANILA BRANCH	213,607,441.58	0.00	NA
BDO PRIVATE BANK, INC.	9,027,427.33	0.00	NA
CATHAY UNITED BANK CO LTD - MANILA BRANCH	40,955,384.07	0.00	NA
FIRST COMMERCIAL BANK LTD MANILA BRANCH	7,558,600.00	0.00	NA
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	NA
INDUSTRIAL BANK OF KOREA MANILA BRANCH	24,462,732.17	0.00	NA
ISLA BANK(A THRIFT BANK) INC	4,290,580.33	0.00	NA
JP MORGAN CHASE BANK NATIONAL ASSN.	16,000,000.00	0.00	NA
MEGA INT'L COMM'L BANK CO LTD	141,821,431.83	0.00	NA
MIZUHO BANK LTD - MANILA BRANCH	519,990,226.78	0.00	NA
MUFG BANK, LTD.	388,210,030.46	0.00	NA
PHIL STAR DEVELOPMENT BANK INC	312,222.47	0.00	NA
SHINHAN BANK - MANILA BRANCH	22,491,063.77	0.00	NA
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	175,897,695.44	0.00	NA
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	16,444,498.47	0.00	NA

 Source: www.bsp.gov.ph

The Top Distressed Philippine Banks as of June 30, 2018

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, 2018.  It updates a previous blog post: "The Top Distressed Philippine Banks as of March 31, 2018".

To see where your bank stands relative to these banks, please check the previous blog post: "Philippine Banks Improve Slightly in the 2nd Quarter of 2018"

The list of Philippine Banks classified as distressed as of June 30, 2018 are as follows:


 

1.  Inter-Asia Development Bank (Distressed Ratio of 361.81%)
2.  United Coconut Planters Bank (Distressed Ratio of 301.26%)
3.  Bangko Kabayan Inc (Distressed Ratio of 234.77%)
4.  Malayan Bank Savings and Mortgage Bank Inc (Distressed Ratio of 166.55%)
5. Enterprise Bank Inc (Distressed Ratio of 164.86%)
6. Yuanta Savings Bank Philippines (Distressed Ratio of 164.10%)
7. RCBC Savings Bank (Distressed Ratio of 131.11%)
8. Philippine Business Bank Inc (Distressed Ratio of 131.11%)
9. Equicom Savings Bank (Distressed Ratio of 119.88%)
10. Bank of China Limited - Manila Branch (Distressed Ratio of 119.56%)
11. China Bank Savings Inc (Distressed Ratio of 111.07%)
12. Philippine Resources Savings Banking Corporation (Distressed Ratio of 103.59%)
13. Bataan Development Bank (Distressed Ratio of 100.62%)

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, 2018 and June 30, 2018 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 Improve Slightly in the 2nd Quarter of 2018

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 11.27 billion or 1.58% from March 31, 2018 to June 30, 2018.  This increase was offset by the increase of their Total Capital Cushion of Php 101.89 billion or 5.48% during the same period. As a result, the Ratio of Total Distressed Assets to Total Capital Cushion of Philippine Commercial Banks decreased by 1.87%, from 38.34% as of March 31, 2018 to 36.47% as of June 30, 2018. On a year on year basis, the Distressed Asset Ratio has decreased 2.20 percentage points from 38.67% as of June 30, 2017 to just 36.47% as of June 30, 2018.

  

The list of Philippine Banks classified as distressed as of June 30, 2018 are as follows:

1.  Inter-Asia Development Bank (Distressed Ratio of 361.81%)
2.  United Coconut Planters Bank (Distressed Ratio of 301.26%)
3.  Bangko Kabayan Inc (Distressed Ratio of 234.77%)
4.  Malayan Bank Savings and Mortgage Bank Inc (Distressed Ratio of 166.55%)
5. Enterprise Bank Inc (Distressed Ratio of 164.86%)
6. Yuanta Savings Bank Philippines (Distressed Ratio of 164.10%)
7. RCBC Savings Bank (Distressed Ratio of 131.11%)
8. Philippine Business Bank Inc (Distressed Ratio of 131.11%)
9. Equicom Savings Bank (Distressed Ratio of 119.88%)
10. Bank of China Limited - Manila Branch (Distressed Ratio of 119.56%)
11. China Bank Savings Inc (Distressed Ratio of 111.07%)
12. Philippine Resources Savings Banking Corporation (Distressed Ratio of 103.59%)
13. Bataan Development Bank (Distressed Ratio of 100.62%)

As a group, the distressed banks showed a decrease in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at 152.12% as of June 30, 2018, down from 161.57% as of March 31, 2018.


 Arrivals

1.  Philippine Business Bank Inc entered the Distressed Banks list with a Distressed Asset Ratio of 128.52% as of June 30, 2018, up from only 35.45% as of March 31, 2018.

 Departures

1.  Metro Cebu Public Savings Bank left the Distressed Banks list with a Distressed Asset Ratio of 12.84% as of June 30, 2018, down from 114.05% as of March 31, 2018.

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, 2018 and June 30, 2018 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.