The non-performing loans (NPL) of the country’s biggest banks dropped further to below 2 percent of their total loan portfolios in November 2014, indicating that individual banks took prudential measures to maintain financial stability as they also raised their loan-loss provisions, the central bank said.
Figures released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed that the NPL ratio of universal and commercial banks (U/KBs) by end-November stood at 1.98 percent, down from 2.38 percent a year earlier.
The November figure also followed the 2.05 percent NPL ratio recorded in October and the 2.04 percent in September last year, the BSP said in a statement.
Bad loans fell to P95.52 billion in November from P96.54 billion in October and P96.15 billion a year earlier.
The banks’ total loan portfolios rose to P4.83 trillion combined in November from P4.712 trillion in October. The new total also exceeded the P4.037 trillion recorded in November 2013.
“Aside from their low NPL levels, the banks also kept their loan-loss reserves higher than their gross NPLs,” the BSP said.
In November, the industry provisioned for 140.91 percent of its gross NPLs, higher than the 138.64 percent in the preceding month and 132.25 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 71.4 percent of the banks’ TLP during the period, the central bank said.
“NPL management and provisioning for potential credit loss are prudential measures that foster the stability of individual banks as well as the domestic banking system. This is in line with the BSP’s broader objective of promoting financial stability,” it added.
Thrift banks Q3 NPLs down
The BSP also reported that the gross NPL ratio at thrift banks fell in the third quarter of 2014 to 4.52 percent of their total loan portfolio.
The third-quarter ratio slipped from 4.83 percent in the preceding quarter and 5.89 percent a year earlier.
“Thrift banks’ gross NPL ratio remained low due to a rise in TLP and a decline in gross NPLs,” the BSP said.
During the quarter, the segment’s TLP rose to P575.78 billion from P562.85 billion a quarter earlier and from the P490.70 billion in the third quarter of 2013.
Bad loans dropped to P26.05 billion in the third quarter last year from P27.16 billion a quarter earlier and P28.89 in the year-earlier period.
The segment also maintained substantial reserves for potential credit losses. At the end of the third quarter of 2014, the industry’s loan-loss reserves represented 74.38 percent of its gross NPLs, higher than the 70.27 percent posted in the second quarter of 2014. It was also higher than 69.90 percent recorded in the year-earlier period.
“The decline in NPL levels indicate an improvement in the TBs’ loan quality,” the BSP said.