Are Philippine Banks Under Provisioning Loan Losses? - As of December 31, 2018

Are Philippine banks under provisioning loan losses?    

On the face of it, no.    

At 1.26% as of December 31, 2018, NPLs as a percentage of Total Loan Portfolios are at historic lows.

 Although the NPL Coverage Ratio is near historic highs at 130.67% as of December 31, 2018, it has dropped considerably from its peak of 149.53% as of December 31, 2017.

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 4.51% 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 December 31, 2018, LLR/TLP stands at 1.64%, which is below the historical average of 4.51%, 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
December 31, 2018
Bank	Loan Loss Provisions	Gross NPLs	NPL Coverage Ratio
UCPB SAVINGS BANK	586,168,305.86	2,520,179,947.97	23.26%
PACIFIC ACE SAVINGS BANK INC	2,348,484.84	7,984,007.00	29.41%
MARITIME SAVINGS BANK CORPORATION	6,948,645.24	22,037,335.09	31.53%
EQUICOM SAVINGS BANK INC	241,713,735.53	678,665,503.25	35.62%
WEALTH DEVELOPMENT BANK CORPORATION	162,085,067.38	425,898,417.61	38.06%
ASIA UNITED BANK CORPORATION	1,101,213,227.88	2,843,723,749.05	38.72%
LUZON DEVELOPMENT BANK	217,112,698.31	511,816,689.86	42.42%
STERLING BANK OF ASIA INC (A SAVINGS BANK)	633,695,238.36	1,479,597,307.93	42.83%
PNB SAVINGS BANK	1,112,566,622.49	2,489,981,239.03	44.68%
PRODUCERS SAVINGS BANK CORPORATION	174,370,395.80	369,105,717.33	47.24%
QUEZON COCONUT BANK INC (A THRIFT BANK)	1,303,520.97	2,662,507.14	48.96%
RCBC SAVINGS BANK INC	2,258,272,487.07	4,538,925,881.88	49.75%
BPI FAMILY SAVINGS BANK INC	5,828,635,522.01	11,106,593,641.57	52.48%
CHINA BANK SAVINGS INC	1,852,672,792.44	3,487,278,553.65	53.13%
PHIL SAVINGS BANK	3,524,948,822.74	6,615,926,206.09	53.28%
ALLBANK (A THRIFT BANK) INC	32,418,962.81	58,307,833.04	55.60%
PAMPANGA DEVELOPMENT BANK	32,638,326.43	58,019,633.67	56.25%
LEMERY SAVINGS & LOAN BANK, INC.	3,226,233.46	5,620,497.35	57.40%
1ST VALLEY BANK INC A DEVELOPMENT BANK	314,268,918.97	545,183,711.79	57.64%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT BANK)	20,709,613.77	34,853,596.58	59.42%
ENTERPRISE BANK INC (A THRIFT BANK)	206,217,463.29	334,690,957.76	61.61%
CITYSTATE SAVINGS BANK INC	74,322,686.83	116,312,839.73	63.90%
BATAAN DEVELOPMENT BANK	22,420,075.55	34,980,091.08	64.09%
PHILIPPINE RESOURCES SAVINGS BANKING CORPORATION (PR SAVINGS	1,000,583,422.40	1,556,381,247.87	64.29%
FARMERS SAVINGS & LOAN BANK INC	26,526,351.09	41,255,102.82	64.30%
DUMAGUETE CITY DEV BANK INC	19,299,237.59	29,686,507.43	65.01%
EAST WEST BANKING CORP	6,783,668,064.65	10,239,430,293.81	66.25%
BUSINESS AND CONSUMERS BANK (A DB)	9,629,770.26	14,297,923.05	67.35%
LIFE SAVINGS BANK INC	5,424,695.67	7,909,027.36	68.59%
BANK OF MAKATI (A SAVINGS BANK) INC	1,416,211,879.00	2,061,100,494.13	68.71%
UNION BANK OF THE PHILS	6,376,143,862.37	8,681,263,266.47	73.45%
FIRST CONSOLIDATED BANK INC (A PDB)	702,400,198.51	937,301,137.75	74.94%
STANDARD CHARTERED BANK	1,988,192,954.24	2,613,663,314.20	76.07%
MALAYAN BANK SAVINGS AND MORT BANK INC	176,590,880.31	232,068,015.56	76.09%
HIYAS BANKING CORPORATION	23,858,848.68	28,152,649.56	84.75%
LEGAZPI SAVINGS BANK INC	276,759,960.86	325,749,920.79	84.96%
SUN SAVINGS BANK INC	18,733,181.51	21,977,627.97	85.24%
BANK ONE SAVINGS CORPORATION	44,360,200.39	50,920,016.00	87.12%
RIZAL COMM'L BANKING CORP	3,354,013,913.93	3,778,814,274.91	88.76%
BPI DIRECT BANKO INC A SAVINGS BANK	711,470,070.69	797,910,869.09	89.17%
UNIVERSITY SAVINGS BANK INC	38,806,861.19	41,532,383.06	93.44%
YUANTA SAVINGS BANK PHILIPPINES INC	100,931,349.56	105,709,543.16	95.48%
INTER-ASIA DEVELOPMENT BANK	7,309,690.80	7,591,147.82	96.29%
PHIL BANK OF COMMUNICATIONS	2,167,506,753.56	2,204,146,296.88	98.34%
PHILIPPINE BUSINESS BANK INC A SAVINGS BANK	1,706,381,776.70	1,654,529,173.88	103.13%
NORTHPOINT DEV'T BANK INC	101,947,108.84	98,818,586.90	103.17%
PENBANK INC (A PDB) (FORMERLY: PENINSULA RB INC)	112,139,598.46	104,417,002.42	107.40%
DEVELOPMENT BANK OF THE PHIL	7,133,850,586.50	6,424,374,586.99	111.04%
MERCHANTS SAVINGS & LOAN ASSN INC	79,682,059.26	70,743,639.74	112.63%
SECURITY BANK CORP	3,161,010,688.45	2,796,885,255.23	113.02%
CORDILLERA SAVINGS BANK INC	14,379,069.48	12,123,604.31	118.60%
BANK OF THE PHIL ISLANDS	15,839,711,208.04	13,052,121,266.84	121.36%
CTBC BANK (PHILIPPINES) CORP	815,157,667.55	632,988,633.22	128.78%
MAYBANK PHILIPPINES INCORPORATED	2,319,584,041.63	1,639,158,444.58	141.51%
ROBINSONS BANK CORPORATION	1,054,220,185.44	730,058,854.95	144.40%
BANK OF COMMERCE	2,321,448,605.10	1,574,874,658.91	147.41%
CARD SME BANK INC A THRIFT BANK	209,329,524.53	135,584,638.32	154.39%
PHIL NATIONAL BANK	14,824,944,768.63	9,449,896,609.90	156.88%
LAND BANK OF THE PHILIPPINES	15,765,027,265.62	9,134,879,593.32	172.58%
CHINA BANKING CORP	5,018,293,472.15	2,672,209,854.94	187.80%
CENTURY SAVINGS BANK CORPORATION	19,537,665.62	9,670,265.48	202.04%
BDO UNIBANK INC	37,125,293,082.34	17,108,039,954.27	217.00%
PHIL STAR DEVELOPMENT BANK INC	9,482,646.07	4,367,377.11	217.12%
METROPOLITAN BANK & TCO	17,762,616,961.78	8,041,215,004.71	220.89%
METRO CEBU PUBLIC SAVINGS BANK	20,809,073.56	8,869,721.90	234.61%
CITIBANK, N.A.	3,133,374,962.15	1,156,260,580.22	270.99%
HSBC SAVINGS BANK(PHILS) INC	102,141,722.09	37,517,115.56	272.25%
PHIL TRUST COMPANY	3,312,326,017.46	1,158,278,288.02	285.97%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK A THRIFT BANK	23,293,288.66	6,842,722.12	340.41%
HONGKONG & SHANGHAI BANKING CORP	1,842,444,054.04	511,083,509.97	360.50%
KEB HANA BANK - MANILA BRANCH	87,545,320.21	23,050,211.32	379.80%
BANGKOK BANK PUBLIC CO LTD	514,119,420.00	23,558,872.16	2182.28%
MEGA INT'L COMM'L BANK CO LTD	249,403,952.44	4,815,000.00	5179.73%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	7,728,107.81	107,342.00	7199.52%
ING BANK N.V.	17,741,700.39	107.16	16556271.36%
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED	58,845,125.55	0.00	NA
BANK OF AMERICA N.A.	9,403,669.08	0.00	NA
BANK OF CHINA LIMITED-MANILA BRANCH	120,837,688.40	0.00	NA
BDO PRIVATE BANK, INC.	7,976,407.70	0.00	NA
CATHAY UNITED BANK CO LTD - MANILA BRANCH	33,383,797.25	0.00	NA
CHANG HWA COMMERCIAL BANK LTD - MANILA BRANCH	3,190,909.05	0.00	NA
CIMB BANK PHILIPPINES INC	0.00	0.00	NA
DEUTSCHE BANK AG	213,855,823.57	0.00	NA
FIRST COMMERCIAL BANK LTD MANILA BRANCH	7,409,560.00	0.00	NA
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	NA
INDUSTRIAL BANK OF KOREA MANILA BRANCH	30,371,287.79	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
MIZUHO BANK LTD - MANILA BRANCH	564,948,450.39	0.00	NA
MUFG BANK, LTD.	387,752,746.02	0.00	NA
SHINHAN BANK - MANILA BRANCH	43,985,672.68	0.00	NA
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	57,509,951.73	0.00	NA
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	16,131,526.95	0.00	NA
Grand Total	179,351,042,002.08	147,814,383,446.62	121.34%

 Source: www.bsp.gov.ph

The Top Distressed Philippine Banks as of December 31, 2018

Editor's Note: This post has been updated to reflect new information on the BSP website. The number of non-reporting banks has decreased from 21 banks as of January 2, 2019 to just 8 banks as of April 1, 2019.

Editor's Note: According to the BSP website, www.bsp.gov.ph, a record 8 banks do not have Published Statements of Condition for the quarter ended on December 31, 2018. This comprises 8% of the 101 Philippine Universal and Commercial Banks (U/KBs) and Thrift Banks tracked by this blog. A google search reveals that these non-reporting banks are still operating and there has been no adverse news about them. So why have they gone dark?
 
The number of non-reporting banks has gone up substantially in 2018. As of March 31, 2018, only two banks failed to have their Published Statements of Condition available at the BSP website. On June 30, 2018, that number went up to six. On September 30, 2018, that number grew to 9. As of December 31, 2018, that number decreased by 1, to 8.
 
Have these banks opted-out from the required financial disclosures? It's not clear if they have done so. Apparently, banks can opt-out of mandatory public disclosure.

"Banks that do not want their statement of condition published must get approval from at least five members of the seven-man Monetary Board.² The regulators themselves may also decide to exclude certain kinds of banks from mandatory public disclosure."

Not all of these banks are small banks, some of them are UKBs that are fairly substantial in size. Here's the list:


 

Philippine Banking System
Banks with No Published Statement of Condition
December 31, 2018
Bank	Type of Bank	Published Statement of Condition
BATAAN SAVINGS AND LOAN BANK	Thrift Bank	NA
CITY SAVINGS BANK INC	Thrift Bank	NA
MALASIQUI PROGRESSIVE SLB, INC	Thrift Bank	NA
MAXIMUM SAVINGS BANK	Thrift Bank	NA
OVERSEAS FILIPINO BANK	Thrift Bank	NA
PHILIPPINE VETERANS BANK	U/KB	NA
THE PALAWAN BANK (PALAWAN DB) INC	Thrift Bank	NA
UNITED COCONUT PLANTERS BANK	U/KB	NA

Let's hope that this is a mere glitch in the BSP website. Perhaps, their financial disclosures were improperly uploaded in the BSP website. Otherwise, the depositors have no means of evaluating the health of their bank other than what is disclosed in the individual bank's website or what is available in back-dated issues of obscure newspapers.


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 December 31, 2018.  It updates a previous blog post: "The Top Distressed Philippine Banks as of September 30, 2018".

To see where your bank stands relative to these banks, please check the previous blog post: "Philippine Banks Improve Slightly in the 4th Quarter of 2018 "

The list of Philippine Banks classified as distressed as of December 31, 2018 are as follows:

1. Inter-Asia Development Bank (Distressed Asset Ratio of 373.37%)
2. Luzon Development Bank (Distressed Asset Ratio of 249.62%)
3. Yuanta Savings Bank Philippines (Distressed Asset Ratio of 185.19%)
4.  RCBC Savings Bank Inc (Distressed Asset Ratio of 147.06%)
5.  Enterprise Bank Inc (Distressed Asset Ratio of 142.66%)
6.  United Coconut Planters Bank (Distressed Asset Ratio of 322.75%)
7. Overseas Filipino Bank Inc (Distressed Asset Ratio of 292.01%)
8. Bangko Kabayan Inc (Distressed Asset Ratio of 236.82%)
9. Bank of China Limited - Manila Branch (Distressed Asset Ratio of 135.28%)
10. Philippine Bank of Communications (Distressed Asset Ratio of 123.71%)
11. Equicom Savings Bank (Distressed Asset Ratio of 121.79%)
12. China Bank Savings Inc (Distressed Asset Ratio of 114.14%)
13. UCPB Savings Bank (Distressed Asset Ratio of 108.55%)

 

 

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 September 30, 2018 and December 31, 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 4th Quarter of 2018

Editor's Note: This post has been updated to reflect new information on the BSP website. The number of non-reporting banks has decreased from 21 banks as of January 2, 2019 to just 8 banks as of April 1, 2019.

Editor's Note: According to the BSP website, www.bsp.gov.ph, a record 8 banks do not have Published Statements of Condition for the quarter ended on December 31, 2018. This comprises 8% of the 101 Philippine Universal and Commercial Banks (U/KBs) and Thrift Banks tracked by this blog. A google search reveals that these non-reporting banks are still operating and there has been no adverse news about them. So why have they gone dark?
 
The number of non-reporting banks has gone up substantially in 2018. As of March 31, 2018, only two banks failed to have their Published Statements of Condition available at the BSP website. On June 30, 2018, that number went up to six. On September 30, 2018, that number grew to 9. As of December 31, 2018, that number decreased by 1, to 8.
 
Have these banks opted-out from the required financial disclosures? It's not clear if they have done so. Apparently, banks can opt-out of mandatory public disclosure.

"Banks that do not want their statement of condition published must get approval from at least five members of the seven-man Monetary Board.² The regulators themselves may also decide to exclude certain kinds of banks from mandatory public disclosure."

Not all of these banks are small banks, some of them are UKBs that are fairly substantial in size. Here's the list:


 

Philippine Banking System
Banks with No Published Statement of Condition
December 31, 2018
Bank	Type of Bank	Published Statement of Condition
BATAAN SAVINGS AND LOAN BANK	Thrift Bank	NA
CITY SAVINGS BANK INC	Thrift Bank	NA
MALASIQUI PROGRESSIVE SLB, INC	Thrift Bank	NA
MAXIMUM SAVINGS BANK	Thrift Bank	NA
OVERSEAS FILIPINO BANK	Thrift Bank	NA
PHILIPPINE VETERANS BANK	U/KB	NA
THE PALAWAN BANK (PALAWAN DB) INC	Thrift Bank	NA
UNITED COCONUT PLANTERS BANK	U/KB	NA

Let's hope that this is a mere glitch in the BSP website. Perhaps, their financial disclosures were improperly uploaded in the BSP website. Otherwise, the depositors have no means of evaluating the health of their bank other than what is disclosed in the individual bank's website or what is available in back-dated issues of obscure newspapers.

 





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 decreased by Php 17.89 billion or 2.54% from September 30, 2018 to December 31, 2018.  This increase was enhanced by the increase of their Total Capital Cushion of Php 49.74 billion or 2.50% during the same period. As a result, the Ratio of Total Distressed Assets to Total Capital Cushion of Philippine Commercial Banks decreased by 1.36%, from 35.31% as of September 30, 2018 to 33.94% as of December 31, 2018. On a year on year basis, the Distressed Asset Ratio has decreased 5.12 percentage points from 39.06% as of December 31, 2017 to just 33.94% as of December 31, 2018.

 The list of Philippine Banks classified as distressed as of December 31, 2018 are as follows:

 

The Top Distressed Philippine Banks
Total Distressed Assets/ Total Capital Cushion
December 31, 2018
In Php
	December 31, 2018
Bank	Total Distressed Assets (In PhP)	Total Capital Cushion (In PhP)	Distressed Assets/ Total Capital Cushion (In %)
INTER-ASIA DEVELOPMENT BANK	314,108,711.83	84,127,347.80	373.37%
LUZON DEVELOPMENT BANK	852,819,539.82	341,642,199.93	249.62%
YUANTA SAVINGS BANK PHILIPPINES INC	1,927,495,314.17	1,040,818,229.19	185.19%
RCBC SAVINGS BANK INC	21,586,216,784.43	14,678,062,148.52	147.06%
ENTERPRISE BANK INC (A THRIFT BANK)	583,574,842.41	409,073,727.19	142.66%
BANK OF CHINA LIMITED-MANILA BRANCH	13,661,367,887.52	10,098,228,294.69	135.28%
PHIL BANK OF COMMUNICATIONS	15,378,409,204.12	12,431,457,217.45	123.71%
EQUICOM SAVINGS BANK INC	1,132,904,069.98	930,196,073.97	121.79%
CHINA BANK SAVINGS INC	12,992,969,137.34	11,383,073,287.39	114.14%
UCPB SAVINGS BANK	3,666,602,193.18	3,377,681,971.50	108.55%
Grand Total	72,096,467,684.80	54,774,360,497.63	131.62%

As a group, the distressed banks showed a decrease in their Total Distressed Assets/Total Capital Cushion Ratios.  This ratio now stands at  131.62% as of December 31, 2018, down from 158.15% as of September 30, 2018.

 Arrivals

1. Philippine Bank of Communications entered the Distressed Banks list with a Distressed Asset Ratio of 123.71% as of December 31, 2018. On September 30, 2018, it had a Distressed Asset Ratio of 87.03%.
2. UCPB Savings Bank entered the Distressed Banks list with a Distressed Asset Ratio of 108.55% as of  December 31, 2018. On September 30, 2018, it had a Distressed Asset Ratio of 84.63%.

 Departures

1. Philippine Resources Savings Banking Corporation left the Distressed Banks list with a Distressed Asset Ratio of 92.04% as of September 30, 2018, down from 103.36% as of September 30, 2018.
2. Malayan Bank Savings and Mortgage Bank Inc left the Distressed Banks list with a Distressed Asset Ratio of 54.16% as of December 31, 2018, down from 168.70% as of September 30, 2018.
3. Bangko Kabayan Inc left the Distressed Banks list with a Distressed Asset Ratio of 41.86% as of December 31, 2018, down from 236.82% as of September 30, 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 September 30, 2018 and December 31, 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.