An 80% Minimum NPL Coverage Ratio will Result in a Severe Undercapitalization of Some Philippine Banks - September 30, 2018

In a previous blog post called "Are Philippine Banks Under Provisioning Loan Losses? - As of June 30, 2018", we discussed the current aggregate Loan Loss Reserves (LLR) as a percentage of Total Loan Portfolio (TLP), which stood at 1.91% as of June 30, 2018, is below the historic average of 4.08% for the last thirty-four years.

Despite NPLs being at or near historic lows, some banks still have not adequately provisioned for loan losses. Their NPL Coverage Ratios are below the ideal ratio of 100% and even below the suggested minimum of 80% NPL Coverage Ratio.

As the table below suggests, it seems that around 34 banks (highlighted in yellow, failed banks in red) fall into this deficiency.

 

Philippine Banking System
NPL Coverage Ratio
September 30, 2018
Bank	Loan Loss Provisions	Gross NPLs	NPL Coverage Ratio
OVERSEAS FILIPINO BANK INC A SAVINGS BANK OF LANDBANK	429,050,672.43	2,200,789,892.72	19.50%
ALLBANK (A THRIFT BANK) INC	33,943,161.99	127,269,730.63	26.67%
PHILIPPINE RESOURCES SAVINGS BANKING	384,104,649.18	1,335,254,894.57	28.77%
LEMERY SAVINGS & LOAN BANK, INC.	2,245,080.45	7,744,052.82	28.99%
UCPB SAVINGS BANK	567,011,384.46	1,935,843,102.92	29.29%
MARITIME SAVINGS BANK CORPORATION	6,948,645.24	22,871,486.95	30.38%
PNB SAVINGS BANK	805,324,872.37	2,432,403,665.94	33.11%
WEALTH DEVELOPMENT BANK CORPORATION	155,828,456.99	430,079,540.50	36.23%
PACIFIC ACE SAVINGS BANK INC	2,123,336.17	5,715,436.00	37.15%
EQUICOM SAVINGS BANK INC	261,892,363.03	680,239,107.69	38.50%
ENTERPRISE BANK INC (A THRIFT BANK)	148,926,171.26	356,405,207.95	41.79%
STERLING BANK OF ASIA INC (A SAVINGS	712,777,155.31	1,540,579,044.23	46.27%
QUEZON COCONUT BANK INC (A THRIFT BANK)	1,303,520.97	2,750,058.15	47.40%
1ST VALLEY BANK INC A DEVELOPMENT BANK	322,298,761.39	655,178,883.27	49.19%
BATAAN DEVELOPMENT BANK	21,905,463.47	43,838,647.03	49.97%
UNIVERSITY SAVINGS BANK INC	44,855,430.47	88,980,921.54	50.41%
CITY SAVINGS BANK INC	1,278,143,141.45	2,349,989,074.91	54.39%
RCBC SAVINGS BANK INC	2,384,442,457.66	4,323,774,066.58	55.15%
CHINA BANK SAVINGS INC	1,974,885,653.33	3,441,198,508.56	57.39%
BPI FAMILY SAVINGS BANK INC	6,208,962,899.55	10,552,134,142.00	58.84%
PRODUCERS SAVINGS BANK CORPORATION	178,366,079.27	301,475,746.19	59.16%
PAMPANGA DEVELOPMENT BANK	35,695,784.79	56,591,647.47	63.08%
BUSINESS AND CONSUMERS BANK (A DB)	9,807,832.52	15,247,805.02	64.32%
EAST WEST BANKING CORP	6,664,874,408.99	9,928,665,998.30	67.13%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT	24,867,661.97	36,485,231.94	68.16%
FIRST CONSOLIDATED BANK INC (A PDB)	664,965,033.94	972,574,900.13	68.37%
UNITED COCONUT PLANTERS BANK	4,029,910,303.35	5,788,951,065.80	69.61%
BANK OF MAKATI (A SAVINGS BANK) INC	1,598,324,910.06	2,236,149,315.57	71.48%
UNION BANK OF THE PHILS	6,040,061,826.69	8,362,824,273.02	72.23%
PHIL SAVINGS BANK	4,613,120,050.09	6,079,237,828.83	75.88%
HIYAS BANKING CORPORATION	28,859,545.81	37,619,784.78	76.71%
CITYSTATE SAVINGS BANK INC	74,322,686.83	95,397,795.70	77.91%
STANDARD CHARTERED BANK	2,079,910,436.34	2,636,355,424.79	78.89%
BANK ONE SAVINGS CORPORATION	44,360,200.39	55,495,016.00	79.94%
BPI DIRECT BANKO INC A SAVINGS BANK	758,636,217.56	940,487,823.05	80.66%
LEGAZPI SAVINGS BANK INC	269,295,308.41	333,789,458.23	80.68%
SUN SAVINGS BANK INC	20,767,357.87	24,553,384.53	84.58%
RIZAL COMM'L BANKING CORP	3,198,644,715.60	3,687,347,269.88	86.75%
MALAYAN BANK SAVINGS AND MORT BANK INC	344,978,703.57	383,863,085.92	89.87%
ASIA UNITED BANK CORPORATION	2,916,218,326.27	3,140,761,256.03	92.85%
PHIL BANK OF COMMUNICATIONS	2,071,632,660.95	2,227,830,089.40	92.99%
YUANTA SAVINGS BANK PHILIPPINES INC	103,943,371.91	107,918,892.35	96.32%
INTER-ASIA DEVELOPMENT BANK	7,801,138.20	8,003,219.40	97.48%
PHILIPPINE BUSINESS BANK INC A SAVINGS	1,659,463,062.38	1,670,174,788.13	99.36%
DUMAGUETE CITY DEV BANK INC	19,299,237.59	19,352,294.27	99.73%
ROBINSONS BANK CORPORATION	869,175,859.43	837,243,488.25	103.81%
PENBANK INC (A PDB) (FORMERLY: PENINSULA	116,963,969.64	112,664,915.67	103.82%
NORTHPOINT DEV'T BANK INC	116,559,202.49	107,859,057.88	108.07%
FARMERS SAVINGS & LOAN BANK INC	27,476,885.73	25,140,440.92	109.29%
DEVELOPMENT BANK OF THE PHIL	7,262,443,464.95	6,602,579,350.58	109.99%
CORDILLERA SAVINGS BANK INC	15,165,504.60	13,267,153.17	114.31%
MERCHANTS SAVINGS & LOAN ASSN INC	78,886,433.96	68,439,569.26	115.26%
SECURITY BANK CORP	3,185,335,132.57	2,617,722,711.70	121.68%
BANK OF COMMERCE	2,188,032,631.22	1,716,313,857.28	127.48%
MAYBANK PHILIPPINES INCORPORATED	2,156,753,376.51	1,684,022,869.48	128.07%
PHIL NATIONAL BANK	12,371,380,234.05	9,211,276,436.89	134.31%
BANK OF THE PHIL ISLANDS	15,415,358,860.40	11,453,165,899.59	134.59%
LAND BANK OF THE PHILIPPINES	15,396,683,001.08	10,303,174,785.49	149.44%
CTBC BANK (PHILIPPINES) CORP	760,381,386.86	486,534,090.10	156.29%
CARD SME BANK INC A THRIFT BANK	179,343,060.47	113,262,457.07	158.34%
CHINA BANKING CORP	5,250,825,862.95	2,977,677,152.77	176.34%
LIFE SAVINGS BANK INC	5,424,695.67	2,826,635.39	191.91%
BDO UNIBANK INC	33,313,727,520.85	16,819,459,499.14	198.07%
CENTURY SAVINGS BANK CORPORATION	19,537,665.62	9,576,010.25	204.03%
METROPOLITAN BANK & TCO	17,528,399,632.04	7,311,098,641.93	239.75%
HSBC SAVINGS BANK(PHILS) INC	103,572,570.73	39,257,127.28	263.83%
METRO CEBU PUBLIC SAVINGS BANK	25,738,098.54	9,340,189.11	275.56%
CITIBANK, N.A.	2,881,557,893.29	1,041,410,107.97	276.70%
PHIL TRUST COMPANY	3,276,793,042.10	1,120,924,013.08	292.33%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK	22,468,801.30	7,096,494.50	316.62%
HONGKONG & SHANGHAI BANKING CORP	1,778,392,988.32	496,832,854.33	357.95%
KEB HANA BANK - MANILA BRANCH	96,772,719.47	23,050,217.08	419.83%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	3,250,374.39	107,342.00	3028.05%
MEGA INT'L COMM'L BANK CO LTD	226,379,249.43	5,025,000.00	4505.06%
ING BANK N.V.	94,683,922.69	110.04	86045004.26%
BANK OF AMERICA N.A.	21,994,948.48	0.00	NA
BANK OF CHINA LIMITED-MANILA BRANCH	178,392,364.78	0.00	NA
BDO PRIVATE BANK, INC.	8,960,971.92	0.00	NA
CATHAY UNITED BANK CO LTD - MANILA BRANCH	30,208,542.18	0.00	NA
CHANG HWA COMMERCIAL BANK LTD - MANILA BRANCH	0.00	0.00	NA
DEUTSCHE BANK AG	243,015,193.99	0.00	NA
FIRST COMMERCIAL BANK LTD MANILA BRANCH	6,522,440.00	0.00	NA
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	NA
INDUSTRIAL BANK OF KOREA MANILA BRANCH	28,590,213.94	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	519,938,706.71	0.00	NA
MUFG BANK, LTD.	388,082,494.46	0.00	NA
PHIL STAR DEVELOPMENT BANK INC	413,704.66	0.00	NA
SHINHAN BANK - MANILA BRANCH	28,545,705.05	0.00	NA
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	24,055,138.32	0.00	NA
Grand Total	179,471,575,184.69	156,896,541,337.89	114.39%

Raising the NPL Coverage Ratio to a minimum of 80% will entail additional loan loss provisions for some banks that could eat into a substantial chunk (20% or more) of their Stockholder's Equity.  Based on the table below, four banks will be severely affected:


 

Philippine Banking System
Impact on SE of Minimum Loan Loss Provisions
September 30, 2018
Bank	Gross NPLs	Minimum Loan Loss Provisions at 80% NPL Coverage Ratio	Actual Loan Loss Provisions	Excess/Deficit Loan Loss Provisions	Stockholder's Equity	Impact on SE
OVERSEAS FILIPINO BANK INC A SAVINGS BANK OF LANDBANK	2,200,789,892.72	1,760,631,914.18	429,050,672.43	-1,331,581,241.75	851,391,260.99	-156.40%
ENTERPRISE BANK INC (A THRIFT BANK)	356,405,207.95	285,124,166.36	148,926,171.26	-136,197,995.10	262,432,745.24	-51.90%
EQUICOM SAVINGS BANK INC	680,239,107.69	544,191,286.15	261,892,363.03	-282,298,923.12	720,551,822.22	-39.18%
UCPB SAVINGS BANK	1,935,843,102.92	1,548,674,482.34	567,011,384.46	-981,663,097.88	2,676,275,605.64	-36.68%
PHILIPPINE RESOURCES SAVINGS BANKING	1,335,254,894.57	1,068,203,915.66	384,104,649.18	-684,099,266.48	2,610,782,762.71	-26.20%
MARITIME SAVINGS BANK CORPORATION	22,871,486.95	18,297,189.56	6,948,645.24	-11,348,544.32	48,057,298.31	-23.61%
STERLING BANK OF ASIA INC (A SAVINGS	1,540,579,044.23	1,232,463,235.38	712,777,155.31	-519,686,080.07	2,666,557,786.63	-19.49%
BATAAN DEVELOPMENT BANK	43,838,647.03	35,070,917.62	21,905,463.47	-13,165,454.15	90,981,864.09	-14.47%
WEALTH DEVELOPMENT BANK CORPORATION	430,079,540.50	344,063,632.40	155,828,456.99	-188,235,175.41	1,458,867,818.36	-12.90%
1ST VALLEY BANK INC A DEVELOPMENT BANK	655,178,883.27	524,143,106.62	322,298,761.39	-201,844,345.23	1,878,319,702.26	-10.75%
PNB SAVINGS BANK	2,432,403,665.94	1,945,922,932.75	805,324,872.37	-1,140,598,060.38	11,968,053,834.19	-9.53%
RCBC SAVINGS BANK INC	4,323,774,066.58	3,459,019,253.26	2,384,442,457.66	-1,074,576,795.60	13,143,447,804.18	-8.18%
CHINA BANK SAVINGS INC	3,441,198,508.56	2,752,958,806.85	1,974,885,653.33	-778,073,153.52	9,665,552,831.21	-8.05%
BPI FAMILY SAVINGS BANK INC	10,552,134,142.00	8,441,707,313.60	6,208,962,899.55	-2,232,744,414.05	31,043,734,154.36	-7.19%
ALLBANK (A THRIFT BANK) INC	127,269,730.63	101,815,784.50	33,943,161.99	-67,872,622.51	1,025,352,805.75	-6.62%
UNIVERSITY SAVINGS BANK INC	88,980,921.54	71,184,737.23	44,855,430.47	-26,329,306.76	415,427,596.89	-6.34%
PAMPANGA DEVELOPMENT BANK	56,591,647.47	45,273,317.98	35,695,784.79	-9,577,533.19	211,695,855.07	-4.52%
LEMERY SAVINGS & LOAN BANK, INC.	7,744,052.82	6,195,242.26	2,245,080.45	-3,950,161.81	88,037,046.62	-4.49%
CITY SAVINGS BANK INC	2,349,989,074.91	1,879,991,259.93	1,278,143,141.45	-601,848,118.48	14,602,983,429.47	-4.12%
UNITED COCONUT PLANTERS BANK	5,788,951,065.80	4,631,160,852.64	4,029,910,303.35	-601,250,549.29	15,545,284,976.24	-3.87%
PRODUCERS SAVINGS BANK CORPORATION	301,475,746.19	241,180,596.95	178,366,079.27	-62,814,517.68	1,870,038,125.55	-3.36%
EAST WEST BANKING CORP	9,928,665,998.30	7,942,932,798.64	6,664,874,408.99	-1,278,058,389.65	41,562,795,425.71	-3.08%
PACIFIC ACE SAVINGS BANK INC	5,715,436.00	4,572,348.80	2,123,336.17	-2,449,012.63	81,290,976.62	-3.01%
BUSINESS AND CONSUMERS BANK (A DB)	15,247,805.02	12,198,244.02	9,807,832.52	-2,390,411.50	89,251,525.56	-2.68%
FIRST CONSOLIDATED BANK INC (A PDB)	972,574,900.13	778,059,920.10	664,965,033.94	-113,094,886.16	4,756,374,516.92	-2.38%
BANK OF MAKATI (A SAVINGS BANK) INC	2,236,149,315.57	1,788,919,452.46	1,598,324,910.06	-190,594,542.40	8,949,660,005.21	-2.13%
QUEZON COCONUT BANK INC (A THRIFT BANK)	2,750,058.15	2,200,046.52	1,303,520.97	-896,525.55	59,188,811.45	-1.51%
PHIL SAVINGS BANK	6,079,237,828.83	4,863,390,263.06	4,613,120,050.09	-250,270,212.97	21,682,564,108.71	-1.15%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT	36,485,231.94	29,188,185.55	24,867,661.97	-4,320,523.58	499,941,142.92	-0.86%
UNION BANK OF THE PHILS	8,362,824,273.02	6,690,259,418.42	6,040,061,826.69	-650,197,591.73	83,357,116,245.76	-0.78%
HIYAS BANKING CORPORATION	37,619,784.78	30,095,827.82	28,859,545.81	-1,236,282.01	181,211,637.94	-0.68%
STANDARD CHARTERED BANK	2,636,355,424.79	2,109,084,339.83	2,079,910,436.34	-29,173,903.49	6,433,779,518.07	-0.45%
CITYSTATE SAVINGS BANK INC	95,397,795.70	76,318,236.56	74,322,686.83	-1,995,549.73	695,147,738.58	-0.29%
BANK ONE SAVINGS CORPORATION	55,495,016.00	44,396,012.80	44,360,200.39	-35,812.41	614,583,060.89	-0.01%
CHANG HWA COMMERCIAL BANK LTD - MANILA BRANCH	0.00	0.00	0.00	0.00	2,151,550,906.66	0.00%
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	0.00	0.00	2,088,229,638.08	0.00%
BDO PRIVATE BANK, INC.	0.00	0.00	8,960,971.92	8,960,971.92	5,089,452,595.77	0.18%
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	0.00	0.00	24,055,138.32	24,055,138.32	13,057,132,001.43	0.18%
BPI DIRECT BANKO INC A SAVINGS BANK	940,487,823.05	752,390,258.44	758,636,217.56	6,245,959.12	2,380,498,023.59	0.26%
RIZAL COMM'L BANKING CORP	3,687,347,269.88	2,949,877,815.90	3,198,644,715.60	248,766,899.70	83,563,839,192.21	0.30%
FIRST COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	6,522,440.00	6,522,440.00	1,994,776,582.76	0.33%
LEGAZPI SAVINGS BANK INC	333,789,458.23	267,031,566.58	269,295,308.41	2,263,741.83	552,479,895.89	0.41%
PHIL STAR DEVELOPMENT BANK INC	0.00	0.00	413,704.66	413,704.66	100,903,539.70	0.41%
SUN SAVINGS BANK INC	24,553,384.53	19,642,707.62	20,767,357.87	1,124,650.25	234,677,569.27	0.48%
CATHAY UNITED BANK CO LTD - MANILA BRANCH	0.00	0.00	30,208,542.18	30,208,542.18	5,219,738,763.97	0.58%
ISLA BANK(A THRIFT BANK) INC	0.00	0.00	4,290,580.33	4,290,580.33	688,999,925.11	0.62%
SHINHAN BANK - MANILA BRANCH	0.00	0.00	28,545,705.05	28,545,705.05	4,233,575,219.10	0.67%
JP MORGAN CHASE BANK NATIONAL ASSN.	0.00	0.00	16,000,000.00	16,000,000.00	2,280,190,545.36	0.70%
BANK OF AMERICA N.A.	0.00	0.00	21,994,948.48	21,994,948.48	2,236,402,418.64	0.98%
SECURITY BANK CORP	2,617,722,711.70	2,094,178,169.36	3,185,335,132.57	1,091,156,963.21	110,023,121,105.34	0.99%
CENTURY SAVINGS BANK CORPORATION	9,576,010.25	7,660,808.20	19,537,665.62	11,876,857.42	974,853,448.93	1.22%
INDUSTRIAL BANK OF KOREA MANILA BRANCH	0.00	0.00	28,590,213.94	28,590,213.94	2,287,606,650.30	1.25%
DUMAGUETE CITY DEV BANK INC	19,352,294.27	15,481,835.42	19,299,237.59	3,817,402.17	268,904,371.88	1.42%
ASIA UNITED BANK CORPORATION	3,140,761,256.03	2,512,609,004.82	2,916,218,326.27	403,609,321.45	27,509,878,284.85	1.47%
ROBINSONS BANK CORPORATION	837,243,488.25	669,794,790.60	869,175,859.43	199,381,068.83	12,391,055,517.66	1.61%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	107,342.00	85,873.60	3,250,374.39	3,164,500.79	191,420,267.24	1.65%
INTER-ASIA DEVELOPMENT BANK	8,003,219.40	6,402,575.52	7,801,138.20	1,398,562.68	81,497,365.68	1.72%
BANK OF CHINA LIMITED-MANILA BRANCH	0.00	0.00	178,392,364.78	178,392,364.78	10,326,804,753.84	1.73%
YUANTA SAVINGS BANK PHILIPPINES INC	107,918,892.35	86,335,113.88	103,943,371.91	17,608,258.03	894,713,556.64	1.97%
PHIL BANK OF COMMUNICATIONS	2,227,830,089.40	1,782,264,071.52	2,071,632,660.95	289,368,589.43	12,258,856,525.99	2.36%
KEB HANA BANK - MANILA BRANCH	23,050,217.08	18,440,173.66	96,772,719.47	78,332,545.81	3,181,245,849.38	2.46%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK	7,096,494.50	5,677,195.60	22,468,801.30	16,791,605.70	676,768,697.94	2.48%
BANK OF THE PHIL ISLANDS	11,453,165,899.59	9,162,532,719.67	15,415,358,860.40	6,252,826,140.73	244,943,113,583.49	2.55%
PHILIPPINE BUSINESS BANK INC A SAVINGS	1,670,174,788.13	1,336,139,830.50	1,659,463,062.38	323,323,231.88	10,692,002,382.23	3.02%
MALAYAN BANK SAVINGS AND MORT BANK INC	383,863,085.92	307,090,468.74	344,978,703.57	37,888,234.83	1,220,714,583.08	3.10%
CHINA BANKING CORP	2,977,677,152.77	2,382,141,722.22	5,250,825,862.95	2,868,684,140.73	79,905,698,095.95	3.59%
CORDILLERA SAVINGS BANK INC	13,267,153.17	10,613,722.54	15,165,504.60	4,551,782.06	126,347,325.60	3.60%
DEVELOPMENT BANK OF THE PHIL	6,602,579,350.58	5,282,063,480.46	7,262,443,464.95	1,980,379,984.49	49,692,662,235.85	3.99%
ING BANK N.V.	110.04	88.03	94,683,922.69	94,683,834.66	2,359,925,861.80	4.01%
MERCHANTS SAVINGS & LOAN ASSN INC	68,439,569.26	54,751,655.41	78,886,433.96	24,134,778.55	577,100,684.96	4.18%
METROPOLITAN BANK & TCO	7,311,098,641.93	5,848,878,913.54	17,528,399,632.04	11,679,520,718.50	275,498,373,694.06	4.24%
PHIL NATIONAL BANK	9,211,276,436.89	7,369,021,149.51	12,371,380,234.05	5,002,359,084.54	115,706,534,484.20	4.32%
LIFE SAVINGS BANK INC	2,826,635.39	2,261,308.31	5,424,695.67	3,163,387.36	71,561,539.54	4.42%
HSBC SAVINGS BANK(PHILS) INC	39,257,127.28	31,405,701.82	103,572,570.73	72,166,868.91	1,501,959,982.97	4.80%
BANK OF COMMERCE	1,716,313,857.28	1,373,051,085.82	2,188,032,631.22	814,981,545.40	15,885,446,788.33	5.13%
CTBC BANK (PHILIPPINES) CORP	486,534,090.10	389,227,272.08	760,381,386.86	371,154,114.78	7,107,330,394.70	5.22%
PENBANK INC (A PDB) (FORMERLY: PENINSULA	112,664,915.67	90,131,932.54	116,963,969.64	26,832,037.10	496,026,518.77	5.41%
FARMERS SAVINGS & LOAN BANK INC	25,140,440.92	20,112,352.74	27,476,885.73	7,364,532.99	135,104,052.70	5.45%
LAND BANK OF THE PHILIPPINES	10,303,174,785.49	8,242,539,828.39	15,396,683,001.08	7,154,143,172.69	124,878,408,978.83	5.73%
BDO UNIBANK INC	16,819,459,499.14	13,455,567,599.31	33,313,727,520.85	19,858,159,921.54	311,051,055,324.27	6.38%
MAYBANK PHILIPPINES INCORPORATED	1,684,022,869.48	1,347,218,295.58	2,156,753,376.51	809,535,080.93	12,320,804,298.35	6.57%
CARD SME BANK INC A THRIFT BANK	113,262,457.07	90,609,965.66	179,343,060.47	88,733,094.81	1,119,003,013.69	7.93%
MUFG BANK, LTD.	0.00	0.00	388,082,494.46	388,082,494.46	4,868,976,775.54	7.97%
NORTHPOINT DEV'T BANK INC	107,859,057.88	86,287,246.30	116,559,202.49	30,271,956.19	359,843,555.03	8.41%
MIZUHO BANK LTD - MANILA BRANCH	0.00	0.00	519,938,706.71	519,938,706.71	5,516,835,936.44	9.42%
HONGKONG & SHANGHAI BANKING CORP	496,832,854.33	397,466,283.46	1,778,392,988.32	1,380,926,704.86	13,730,780,221.06	10.06%
CITIBANK, N.A.	1,041,410,107.97	833,128,086.38	2,881,557,893.29	2,048,429,806.91	19,470,788,969.10	10.52%
DEUTSCHE BANK AG	0.00	0.00	243,015,193.99	243,015,193.99	2,306,640,247.77	10.54%
PHIL TRUST COMPANY	1,120,924,013.08	896,739,210.46	3,276,793,042.10	2,380,053,831.64	20,547,874,035.43	11.58%
MEGA INT'L COMM'L BANK CO LTD	5,025,000.00	4,020,000.00	226,379,249.43	222,359,249.43	1,874,119,562.22	11.86%
METRO CEBU PUBLIC SAVINGS BANK	9,340,189.11	7,472,151.29	25,738,098.54	18,265,947.25	67,130,689.45	27.21%
Grand Total	156,896,541,337.89	125,517,233,070.31	179,471,575,184.69	53,954,342,114.38	1,912,778,068,868.94	2.82%

Source: www.bsp.gov.ph

Out of the five banks highlighted in yellow, three banks have been regularly listed as one of the "The Top Distressed Philippine Banks as of September 30, 2018".

The most notable of the banks in this list is Overseas Filipino Bank. The bank faces a shortfall of 156.40% of its stated stockholder's equity of Php 851.40 million if it were to increase its loan loss provisions to meet a minimum NPL Coverage Ratio of 80%. In short, all of its equity would be wiped out if the bank were to properly account for its losses.

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

Are Philippine banks under provisioning loan losses?
 
On the face of it, no.
 
At 1.30% as of September 30, 2018, NPLs as a percentage of Total Loan Portfolios are at historic lows.

 The NPL Coverage Ratio is near historic highs at 138.26% as of September 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 4.51% 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 September 30, 2018, LLR/TLP stands at 1.80%, 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
September 30, 2018
Bank	Loan Loss Provisions	Gross NPLs	NPL Coverage Ratio
OVERSEAS FILIPINO BANK INC A SAVINGS BANK OF LANDBANK	429,050,672.43	2,200,789,892.72	19.50%
ALLBANK (A THRIFT BANK) INC	33,943,161.99	127,269,730.63	26.67%
PHILIPPINE RESOURCES SAVINGS BANKING	384,104,649.18	1,335,254,894.57	28.77%
LEMERY SAVINGS & LOAN BANK, INC.	2,245,080.45	7,744,052.82	28.99%
UCPB SAVINGS BANK	567,011,384.46	1,935,843,102.92	29.29%
MARITIME SAVINGS BANK CORPORATION	6,948,645.24	22,871,486.95	30.38%
PNB SAVINGS BANK	805,324,872.37	2,432,403,665.94	33.11%
WEALTH DEVELOPMENT BANK CORPORATION	155,828,456.99	430,079,540.50	36.23%
PACIFIC ACE SAVINGS BANK INC	2,123,336.17	5,715,436.00	37.15%
EQUICOM SAVINGS BANK INC	261,892,363.03	680,239,107.69	38.50%
ENTERPRISE BANK INC (A THRIFT BANK)	148,926,171.26	356,405,207.95	41.79%
STERLING BANK OF ASIA INC (A SAVINGS	712,777,155.31	1,540,579,044.23	46.27%
QUEZON COCONUT BANK INC (A THRIFT BANK)	1,303,520.97	2,750,058.15	47.40%
1ST VALLEY BANK INC A DEVELOPMENT BANK	322,298,761.39	655,178,883.27	49.19%
BATAAN DEVELOPMENT BANK	21,905,463.47	43,838,647.03	49.97%
UNIVERSITY SAVINGS BANK INC	44,855,430.47	88,980,921.54	50.41%
CITY SAVINGS BANK INC	1,278,143,141.45	2,349,989,074.91	54.39%
RCBC SAVINGS BANK INC	2,384,442,457.66	4,323,774,066.58	55.15%
CHINA BANK SAVINGS INC	1,974,885,653.33	3,441,198,508.56	57.39%
BPI FAMILY SAVINGS BANK INC	6,208,962,899.55	10,552,134,142.00	58.84%
PRODUCERS SAVINGS BANK CORPORATION	178,366,079.27	301,475,746.19	59.16%
PAMPANGA DEVELOPMENT BANK	35,695,784.79	56,591,647.47	63.08%
BUSINESS AND CONSUMERS BANK (A DB)	9,807,832.52	15,247,805.02	64.32%
EAST WEST BANKING CORP	6,664,874,408.99	9,928,665,998.30	67.13%
BANGKO KABAYAN INC (A PRIVATE DEVELOPMENT	24,867,661.97	36,485,231.94	68.16%
FIRST CONSOLIDATED BANK INC (A PDB)	664,965,033.94	972,574,900.13	68.37%
UNITED COCONUT PLANTERS BANK	4,029,910,303.35	5,788,951,065.80	69.61%
BANK OF MAKATI (A SAVINGS BANK) INC	1,598,324,910.06	2,236,149,315.57	71.48%
UNION BANK OF THE PHILS	6,040,061,826.69	8,362,824,273.02	72.23%
PHIL SAVINGS BANK	4,613,120,050.09	6,079,237,828.83	75.88%
HIYAS BANKING CORPORATION	28,859,545.81	37,619,784.78	76.71%
CITYSTATE SAVINGS BANK INC	74,322,686.83	95,397,795.70	77.91%
STANDARD CHARTERED BANK	2,079,910,436.34	2,636,355,424.79	78.89%
BANK ONE SAVINGS CORPORATION	44,360,200.39	55,495,016.00	79.94%
BPI DIRECT BANKO INC A SAVINGS BANK	758,636,217.56	940,487,823.05	80.66%
LEGAZPI SAVINGS BANK INC	269,295,308.41	333,789,458.23	80.68%
SUN SAVINGS BANK INC	20,767,357.87	24,553,384.53	84.58%
RIZAL COMM'L BANKING CORP	3,198,644,715.60	3,687,347,269.88	86.75%
MALAYAN BANK SAVINGS AND MORT BANK INC	344,978,703.57	383,863,085.92	89.87%
ASIA UNITED BANK CORPORATION	2,916,218,326.27	3,140,761,256.03	92.85%
PHIL BANK OF COMMUNICATIONS	2,071,632,660.95	2,227,830,089.40	92.99%
YUANTA SAVINGS BANK PHILIPPINES INC	103,943,371.91	107,918,892.35	96.32%
INTER-ASIA DEVELOPMENT BANK	7,801,138.20	8,003,219.40	97.48%
PHILIPPINE BUSINESS BANK INC A SAVINGS	1,659,463,062.38	1,670,174,788.13	99.36%
DUMAGUETE CITY DEV BANK INC	19,299,237.59	19,352,294.27	99.73%
ROBINSONS BANK CORPORATION	869,175,859.43	837,243,488.25	103.81%
PENBANK INC (A PDB) (FORMERLY: PENINSULA	116,963,969.64	112,664,915.67	103.82%
NORTHPOINT DEV'T BANK INC	116,559,202.49	107,859,057.88	108.07%
FARMERS SAVINGS & LOAN BANK INC	27,476,885.73	25,140,440.92	109.29%
DEVELOPMENT BANK OF THE PHIL	7,262,443,464.95	6,602,579,350.58	109.99%
CORDILLERA SAVINGS BANK INC	15,165,504.60	13,267,153.17	114.31%
MERCHANTS SAVINGS & LOAN ASSN INC	78,886,433.96	68,439,569.26	115.26%
SECURITY BANK CORP	3,185,335,132.57	2,617,722,711.70	121.68%
BANK OF COMMERCE	2,188,032,631.22	1,716,313,857.28	127.48%
MAYBANK PHILIPPINES INCORPORATED	2,156,753,376.51	1,684,022,869.48	128.07%
PHIL NATIONAL BANK	12,371,380,234.05	9,211,276,436.89	134.31%
BANK OF THE PHIL ISLANDS	15,415,358,860.40	11,453,165,899.59	134.59%
LAND BANK OF THE PHILIPPINES	15,396,683,001.08	10,303,174,785.49	149.44%
CTBC BANK (PHILIPPINES) CORP	760,381,386.86	486,534,090.10	156.29%
CARD SME BANK INC A THRIFT BANK	179,343,060.47	113,262,457.07	158.34%
CHINA BANKING CORP	5,250,825,862.95	2,977,677,152.77	176.34%
LIFE SAVINGS BANK INC	5,424,695.67	2,826,635.39	191.91%
BDO UNIBANK INC	33,313,727,520.85	16,819,459,499.14	198.07%
CENTURY SAVINGS BANK CORPORATION	19,537,665.62	9,576,010.25	204.03%
METROPOLITAN BANK & TCO	17,528,399,632.04	7,311,098,641.93	239.75%
HSBC SAVINGS BANK(PHILS) INC	103,572,570.73	39,257,127.28	263.83%
METRO CEBU PUBLIC SAVINGS BANK	25,738,098.54	9,340,189.11	275.56%
CITIBANK, N.A.	2,881,557,893.29	1,041,410,107.97	276.70%
PHIL TRUST COMPANY	3,276,793,042.10	1,120,924,013.08	292.33%
QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK	22,468,801.30	7,096,494.50	316.62%
HONGKONG & SHANGHAI BANKING CORP	1,778,392,988.32	496,832,854.33	357.95%
KEB HANA BANK - MANILA BRANCH	96,772,719.47	23,050,217.08	419.83%
AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS	3,250,374.39	107,342.00	3028.05%
MEGA INT'L COMM'L BANK CO LTD	226,379,249.43	5,025,000.00	4505.06%
ING BANK N.V.	94,683,922.69	110.04	86045004.26%
BANK OF AMERICA N.A.	21,994,948.48	0.00	NA
BANK OF CHINA LIMITED-MANILA BRANCH	178,392,364.78	0.00	NA
BDO PRIVATE BANK, INC.	8,960,971.92	0.00	NA
CATHAY UNITED BANK CO LTD - MANILA BRANCH	30,208,542.18	0.00	NA
CHANG HWA COMMERCIAL BANK LTD - MANILA BRANCH	0.00	0.00	NA
DEUTSCHE BANK AG	243,015,193.99	0.00	NA
FIRST COMMERCIAL BANK LTD MANILA BRANCH	6,522,440.00	0.00	NA
HUA NAN COMMERCIAL BANK LTD MANILA BRANCH	0.00	0.00	NA
INDUSTRIAL BANK OF KOREA MANILA BRANCH	28,590,213.94	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	519,938,706.71	0.00	NA
MUFG BANK, LTD.	388,082,494.46	0.00	NA
PHIL STAR DEVELOPMENT BANK INC	413,704.66	0.00	NA
SHINHAN BANK - MANILA BRANCH	28,545,705.05	0.00	NA
SUMITOMO MITSUI BANKING CORPORATION-MANILA BRANCH	24,055,138.32	0.00	NA
Grand Total	179,471,575,184.69	156,896,541,337.89	114.39%

Source: www.bsp.gov.ph

The Top Distressed Philippine Banks as of September 30, 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 9 banks as of January 16, 2019.
Editor's Note: According to the BSP website, www.bsp.gov.ph, a record 9 banks do not have Published Statements of Condition for the quarter ended on September 30, 2018. This comprises over 9% of the 100 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. And now that number is now 9 as of September 30, 2018.


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."

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.
 
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
September 30, 2018
Bank	Type of Bank	Published Statement of Condition
ANZ BANKING GROUP LTD	U/KB	NA
BANGKOK BANK PUBLIC CO LTD	U/KB	NA
BATAAN SAVINGS AND LOAN BANK	Thrift Bank	NA
LUZON DEVELOPMENT BANK	Thrift Bank	NA
MALASIQUI PROGRESSIVE SLB, INC	Thrift Bank	NA
MAXIMUM SAVINGS BANK	Thrift Bank	NA
PHILIPPINE VETERANS BANK	U/KB	NA
THE PALAWAN BANK (PALAWAN DB) INC	Thrift Bank	NA
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	U/KB	NA

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

 To see where your bank stands relative to these banks, please check the previous blog post: "Philippine Banks Improve Slightly in the 3rd Quarter of 2018"

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

1. Inter-Asia Development Bank (Distressed Asset Ratio of 370.88%)
2. United Coconut Planters Bank (Distressed Asset Ratio of 322.75%)
3. Overseas Filipino Bank Inc (Distressed Asset Ratio of 292.01%)
4. Bangko Kabayan Inc (Distressed Asset Ratio of 236.82%)
5. Yuanta Savings Bank Philippines (Distressed Asset Ratio of 173.40%)
6. Malayan Bank Savings and Mortgage Bank (Distressed Asset Ratio of 168.70%)
7. Enterprise Bank Inc (Distressed Asset Ratio of 155.18%)
8. RCBC Savings Bank Inc (Distressed Asset Ratio of 133.34%)
9. Equicom Savings Bank (Distressed Asset Ratio of 122.89%)
10. Bank of China Limited - Manila Branch (Distressed Asset Ratio of 115.52%)
11. China Bank Savings Inc (Distressed Asset Ratio of 109.14%)
12. Philippine Resources Savings Banking (Distressed Asset Ratio of 103.36%)

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, 2018 and September 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.