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.