Small banks keeping lid on bad loans


Thrift banks, rural banks and cooperative banks managed to keep a lid on their bad loans in the third quarter of last year, according to central bank data, indicating that the banking system is stable and banks are observing sound credit risk management practices.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the combined non-performing loans (NPLs) of small banks reached P617.49 billion at end-September 2013, accounting for 7.33 percent of their total loan portfolio (TLP) and “practically unchanged” from the 7.32 percent bad loans ratio of the second quarter.

“The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management systems and to maintain high loan quality. These are essential to sustaining the viability of individual banks and to maintaining the overall stability of the domestic financial system,” the BSP said.

The total loan portfolio (TLP) of small banks grew by 14.5 percent in September 2013 from P539.29 billion a year earlier, representing 13.6 percent of the P4.54 trillion gross loan portfolio of the Philippine banking system as of September, the Bangko Sentral said.

Their top loan recipients during the period were the real estate sector, individuals who use the loans for consumption, agriculture, wholesale and retail trade, and financial intermediation.

Meanwhile, the BSP said banks’ loan loss reserves stood at 66.1 percent of their NPLs as of end-September last year, which shows that the industry continues to set aside substantial reserves for potential credit losses.

Thrift banks recorded a 5.89-percent gross NPL ratio in September, down from 6.29 percent a year earlier, while their loan loss reserves fell slightly to 69.90 percent from 71.85 percent the year before.

On the other hand, rural banks’ gross NPL ratio rose to 12.95 percent in September from 11.22 percent a year earlier, while their loan loss reserves decreased to 57.78 percent from 59.36 percent the previous year.

Cooperative banks’ gross NPL ratio declined to 12.74 percent in September from 13.82 percent a year earlier, while their loan loss provisions rose to 79.60 percent from 70.75 percent previously.


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