THE non-performing loan (NPL) ratio of rural and cooperative banks hit its lowest level in more than two years at the end of December 2014 even with an increase in total loans, an indication of continuing financial stability in the sector and compliance with sound credit management policies.
According to data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday, the NPL ratio of small banks declined to 11.85 percent in December 2014 from 12.24 percent in September, and was also lower than the 13.13 percent NPL ratio recorded a year earlier.
“The latest figure is the lowest gross NPL ratio posted collectively by rural banks and cooperative banks since the 11.49 percent recorded at end-September 2012,” the BSP noted.
Small banks’ bad loans at end-December decreased to P16.40 billion, down by 5 percent from P17.31 billion a year earlier.
On a quarterly basis, the gross NPLs of rural and cooperative banks dropped by 0.45 percent from the P16.48 billion recorded at end-September.
The central bank did not suggest specific reasons for the year-on-year and quarter-on-quarter decline of bad loans at small banks, but noted a rise in their total loan portfolio (TLP).
Total loans up
BSP data showed that the TLP of rural and cooperative banks expanded by 5 percent to P138.44 billion in December from the P131.79 billion posted a year earlier.
Their TLP at end-December 2014 was also higher by 2.84 percent from the P134.61 billion recorded at the end of the second quarter.
The bulk of loans from small banks went to economic sectors such as agriculture, hunting, forestry and fishing; wholesale and retail trade; real estate, renting and business activities, and loans to individuals for consumption purposes, the BSP said.
As a buffer against potential credit losses, the banks’ loan-loss reserves stood at 58.30 percent of their gross NPLs in December, slightly higher than the 57.58 percent loan-loss reserve ratio posted at the end of the third quarter, the BSP said.
“The Bangko Sentral ng Pilipinas looks into the loan exposures of the country’s banks as part of its mandate to promote adherence to sound credit underwriting standards. This is essential to financial stability, which is the overarching supervisory policy objective of the BSP,” it said.