• Big banks March bad loans ratio down at 2.16%

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    THE country’s biggest banks managed to keep their bad loans ratio lower at the end of March compared with last year even with a recorded increase in lending, thanks to robust provisioning and prudent lending practices.

    According to Bangko Sentral ng Pilipinas (BSP) data, gross nonperforming loans (NPL) posted by universal and commercial banks (U/KBs) stood at 2.16 percent of their total loan portfolio (TLP) in March, down from 2.74 percent a year earlier, even if their lending increased during the period.

    The total loan portfolio of banks increased to P4.33 trillion in March from P3.63 trillion in the corresponding month last year.

    “Aside from keeping the NPL levels low, the banks also continued to set aside robust provisioning for non-performing loans,” the BSP stated.

    Data shows that the drop in the gross NPL ratio was matched by an increase in banks’ loan loss reserves for soured loans. Loan loss reserves in March stood at 141.22 percent of banks’ NPLs, up from 128.31 percent in the previous year.

    “Setting aside reserves for potential losses is a prudential measure for mitigating credit risk,” the central bank said.

    Even going by a more conservative estimate of NPLs in which past-due loans are classified as bad loans, the NPL ratio remains “manageable” at a hypothetical estimate of 2.43 percent, the central bank said.

    The BSP said the low level of NPLs was observed across all sectors including consumer loans, lending for real estate activities, financial intermediation, manufacturing, wholesale and retail trade, and electricity, gas and water supply.

    “These sectors accounted for more than 70 percent of the U/KBs’ TLP during the period,” it added.

    The BSP monitors the loan quality of banks in line with supervisory efforts to foster prudent risk management. This is essential to financial stability, which is a key policy objective of the BSP, the central bank said.

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