UCPB has weakest capital base among commercial banks

The United Coconut Planters Bank (UCPB) emerged with the weakest capital base in the entire commercial banking industry, as its capital ratio continued to decline in 2002.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that UCPB’s total equity as a percentage of its total assets declined to 2.89 percent as of its Dec. 17, 2002 statement of financial condition.

The capital ratio is an indication of a bank’s capital base and whether it is enough to absorb large-scale loan defaults and radical declines in its asset price.

The BSP explained that the capital ratio "broadly approximates" UCPB’s capital adequacy ratio (CAR) which measures the bank’s equity as a percentage of its risk assets.

Under BSP rules, banks were required to maintain a minimum of 10 percent capital adequacy ratio to ensure that their pockets were deep enough to survive even the worst case scenario.

"Definitely, they are below the central bank’s minimum prescribed CAR level," said a BSP official.

At the end of 2002, UCPB was capitalized at only P2.85 billion which was used to support total assets of P98.6 billion.

"This is the lowest among commercial banks except for Al-Amanah (Islamic Bank) which has negative capital," the official added.

UCPB’s latest capital ratio showed a decline from the 3.4-percent capital ratio it reported at the end of the third quarter.

It’s fourth quarter capital base, on the other hand, declined from the end-September level of P3.62 billion.

By the end of 2002, UCPB’s capital was half of its P5.78 billion in the previous year.

UCPB, has been having problems boosting its capital due to the perennial and unresolved question of ownership that stemmed from the sequestration of the coconut levy funds which were used to initially capitalize the bank.

According to the BSP, UCPB was joined at the bottom of the list by United Overseas Bank (Phils.), Inc. which had the second weakest equity structure in the industry. Its capital ratio was placed at 7.66 percent.

At the end of 2002, UOB was capitalized at P1.1 billion which supported assets of P15.3 billion, indicating that its capital ratio declined from 9.1 percent in the previous quarter.

Following UOB was Land Bank of the Philippines which had a capital ratio of 8.3 percent during the period. Landbank reported a capital of P20.8 billion and P248.4 billion in assets under management.

Landbank’s actual CAR, however, was recorded at 14 percent which was way above the 10 percent minimum CAR required by the BSP.

Trailing the group of banks whose ratio fell below BSP requirements was the Rizal Commercial Banking Corp. (RCBC) which reported a capital ratio of 9.8 percent.

As of end-2002, RCBC was capitalized at P15.4 billion and had P156.2 billion in assets under management.