BAD loans held by the country’s big banks remained low in March, a positive sign that the country’s financial system remains healthy and stable thanks to banks’ sound credit risk management and prudent lending policies.
Figures released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed that the non-performing loan (NPL) ratio of universal and commercial banks (U/KBs) in March declined to 1.95 percent, down from 2.16 percent a year earlier.
The central bank also noted that banks’ gross NPL ratio in March was practically unchanged from the 1.96 percent recorded in February and the 1.98 percent in January 2015.
With NPL ratios remaining low, banks reduced their reserves for potential credit losses during the month.
“Said monthly banking indicator has been below 2 percent since November last year,” the BSP stated.
By absolute amount, however, bad loans rose to P97.36 billion in March from P95.66 billion in February and from the P93.53 billion a year earlier.
Banks’ total loan portfolio (TLP) rose to P4.991 trillion combined in March from P4.874 trillion in February. The new total also exceeded the P4.329 trillion recorded in March 2014.
The BSP defines NPLs as past due loans where the principal or interest is unpaid for 30 days or more after the due date, including the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.
Loss provisions ease
In March, the industry provisioned 138.19 percent of its gross NPLs, lower than the 140.46 percent in the preceding month and from the 140.91 percent registered a year earlier.
Gross NPLs across economic sectors remained manageable and were seen in financial intermediation; real estate; manufacturing; wholesale and retail trade; and electricity, gas, steam and air-conditioning supply, which represented 69 percent of the banks’ TLP during the period, the central bank said.
The BSP monitors the loan quality of the banking system in line with its efforts to foster high credit underwriting standards. This is essential to financial stability, which is the overarching policy objective of the BSP, the central bank said.
Thrift banks’ NPL drops in Q4
In a separate report, the BSP said bad loans held by the country’s thrift banks dropped in the fourth quarter of 2014 from a year earlier even if their lending increased.
According to BSP data, the gross NPL of thrift banks stood at P25.17 billion at end-December, representing 4.38 percent of the banks’ TLP during the period. This compares with an NPL ratio of 5.46 percent in the same period in 2013.
Thrift banks’ TLP rose to P574.63 billion at end-December from P508.20 billion in the last quarter of 2013.
Even as their bad loans ratio dropped, thrift banks still increased their loan-loss reserves to 76.98 percent as of end-December from 72.51 percent a year earlier.
The central bank said that the industry’s NPLs also remained low across economic activities as seen in loans to individuals for consumption purposes; real estate, renting and business activities; agriculture, hunting, forestry and fishing; wholesale and retail trade; and other community, social and personal service activities.
The latest NPL figures indicate thrift banks’ continued efforts to adhere to sound credit risk management systems and to maintain high loan quality, it said.
“The Bangko Sentral ng Pilipinas keenly monitors these indicators as part of its efforts to foster the stability of the financial system,” the BSP added.