NPL ratio sinks below 2% despite increase in bad loans total
The country’s biggest banks posted record-low non-performing loan (NPL) ratios in December 2014, with bad loans declining to less than 2 percent of total loan portfolios in spite of increasing by P2.5 billion year-on-year, the central bank reported.
Figures released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed that the NPL ratio of universal and commercial banks (U/KBs) at end-December stood at 1.82 percent, down from 2.13 percent a year earlier.
December’s NPL ratio marks the lowest ratio posted by U/KBs since the 1997 financial crisis, the central bank said.
“The indicator reached a record low amid a month-on-month decline in NPLs and an increase in the banks’ total loan portfolio [TLP],” the central bank said.
The December NPL figure was the third straight month of decline, following the 1.98 percent NPL ratio recorded in November and the 2.05 percent in October last year, the BSP said in a statement.
Bad loans fell to P93.06 billion in December from P95.52 billion in November but rose from the P90.51 billion a year earlier.
The banks’ total loan portfolio rose to P5.117 trillion combined in December from P4.704 trillion in November. The new total also exceeded the P4.256 trillion recorded in December 2013.
Loss provisions increased
“Aside from keeping the NPL ratio low, the U/KBs continue to allocate substantial reserves for potential credit losses,” the BSP said.
In December, the industry provisioned for 142.43 percent of its gross NPLs, higher than the 140.91 percent in the preceding month but lower than 144.12 percent registered a year earlier.
Gross NPLs across economic sectors remained manageable and were seen in financial intermediation; real estate, renting and business activities; manufacturing; wholesale and retail trade; and electricity, gas and water supply, which represented 72.4 percent of the banks’ TLP during the period, the central bank said.
“The Bangko Sentral ng Pilipinas monitors the quality of bank loans as part of its efforts to foster the strength of individual banks as well as the systemic stability of the domestic banking industry,” it added.