Banks’ bad loans down to lowest level in 8 years

MANILA, Philippines – The non-performing loans (NPls) ratio of universal and commercial banks fell to its lowest level in almost eight years with the steady expansion of the industry’s total loan portfolio, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the BSP showed that the NPL ratio of universal and commercial banks eased to 3.25 percent as of end-September from 3.50 percent as of end-August.

The BSP said the NPL ratio last September was the lowest recorded figure after the ratio peaked at 18.81 percent at end-October 2001. It was also lower by 0.78 percentage point from a year ago level of 4.03 percent.

The central bank figures showed that the industry’s total loan portfolio grew by 7.65 percent to P2.505 trillion as of end-September from P2.397 trillion as of end-August.

On the other hand, NPLs improved by 2.9 percent to P81.42 billion as of end-September from P83.84 billion as of end-August.

NPLs refer to past due loan accounts whose principal and/or interest is unpaid for 30 days.

The gross assets of universal and commercial banks expanded by 2.53 percent to P5.311 trillion as of end-September from P5.18 trillion as of end-August while the industry’s non-performing assets (NPA) improved by 1.05 percent to P219.8 billion from P222.14 billion.

This resulted in a bad loan ratio of 4.14 percent as of end-September from 4.29 percent as of end-August.

Earlier, BSP Governor Amando Tetangco Jr. said the country’s banking sector has remained fundamentally sound despite the impact of the global financial crisis.

“Important banking reforms, particularly in the areas of corporate governance, risk management, and asset clean-up, have strengthened the banking system further, boosting its overall performance in terms of higher asset growth, enhanced asset quality, improved profitability and better capitalization,” Tetangco said.

Monetary authorities believe that the asset quality of the banking system would remain sturdy despite the full impact of the global economic meltdown that started with the financial crisis in the United States late last year.

They believe that Philippine banks have already tightened their credit standards precisely to ensure that they would not end up accumulating bad loans.

A survey conducted by the BSP among senior bank loan officers showed that banks continued to keep their credit standards unchanged for corporate and individual borrowers after surviving the impact of the financial crisis that started in the United States.

A Senior Bank Loan Officers Survey conducted by the Bangko Sentral ng Pilipinas (BSP) revealed that credit standards imposed by banks on borrowers remained unchanged in the third quarter from the second quarter to entice corporations and individuals to borrow money and boost the slackening domestic economy.

Credit tightening was a natural reaction of banks in times of uncertainty since they want to be amply protected from the possibility of default which would ultimately hurt their balance sheets.

In 1997 when Asia was hit by the financial crisis, the Philippine banking system suffered significant losses from loan defaults that led to a dramatic accumulation of bad loans.

• Philstar

Related posts

• RP June inflation falls to 2-decade low (0)
• RP banks’ lending growth may slip to single digits (0)
• Rate hike unlikely as BSP reviews monetary policy (0)
• Philippines contributes to Asian monetary fund (0)
• October forex reserves hit record $43.2 billion (0)
• NSO: March inflation rate moderates (0)
• July inflation falls to 22-year low at 0.2% (0)
• Foreign exchange reserves near $40 billion in July (0)
• Economy responding well to Bangko Sentral actions (0)
• BSP: Peso volatility continues to be minimal (0)