Small banks’ end-2013 bad loans ratio down at 7.04%

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Small banks in the country appear to have improved their lending practices as the ratio of bad loans against the industry’s total loan portfolio (TLP) fell in 2013 from its year-earlier level.

According to Bangko Sentral ng Pilipinas (BSP) data, the combined gross non-performing loans (NPL) of thrift, rural and cooperative banks represented 7.04 percent of the banks’ TLP during the period.

Despite increased lending activity during the year, the gross NPL ratio of small banks improved from the 7.34 percent recorded at end-December 2012. The TLP of banks was up at P639.99 billion at end-December from P577.84 billion in the same period in 2012. The central bank noted that the TLP of small banks at end-2013 represented 13.07 percent of the Philippine banking system’s TLP of P4.90 trillion during the period.

BSP data also showed that the drop in the industry’s gross NPL ratio was matched by an increase in banks’ loan loss reserves for soured loans. Loan loss reserves at end-December stood at 67.58 percent of banks’ NPLs, up from 66.10 percent a quarter earlier. However, loan loss reserves for the period is lower compared to the 66.78 percent at end-December 2012.


By type of banks, the central bank said that thrift banks’ gross NPL ratio and loan loss reserves improved slightly during the fourth quarter of 2013, finishing the year at 5.46 percent and 72.51 percent, respectively, compared to end-September figures of 5.89 percent and 69.90 percent.

On the other hand, the gross NPL ratio of rural banks and cooperative banks rose to 13.13 percent at the end of the previous year from 12.93 percent at the end of the third quarter, while their loan loss reserves increased slightly from 59.40 percent to 59.68 percent during the same period.

The central bank said that among the country’s economic sectors, the small banks’ top borrowers were real estate; individuals who use the loans for consumption; agriculture; wholesale and retail trade; and other community, social and personal service.

“The latest NPL figures indicate an overall improvement in the banks’ loan quality. The BSP keenly monitors this indicator as part of its efforts to promote adherence to high credit standards and to foster the stability of the financial system,” it stated.

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