Universal, commercial banks post lower non-performing loan ratio at end-2016

BIG BANKS saw a lower share of soured debts in 2016, which came alongside rising profits and improving asset quality despite a double-digit rise in total loans granted during the year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Non- performing loans ( NPLs) — which are debts left unpaid for at least 30 days past due date — accounted for just 1.4% of the total credit extended by universal and commercial banks last year, dropping from the 1.52% share posted as of November 2016 and also from the 1.6% seen at end-2015.

Bad debts held by universal and commercial banks posted a modest 2.4% climb to P93.801 billion at end-December from P91.599 billion the year prior.

This came despite a 17.3% jump in total loans granted by the banks, which surged to a record P6.706 trillion at end2016 from P5.72 trillion previously.

Non-performing assets, which come in the form of real property and other items of value seized by lenders from defaulting clients, even posted a 3.6% decline to P72.528 billion from a year ago.

Despite the minimal uptick in soured debts, banks opted to raise their allow-

ance for credit losses by 5% to reach P135.699 billion.

Total reserves for potential defaults accounted for 2.02% of the banks’ loan portfolios, lower than last year’s 2.26% share. Still, the amount is more than enough to cover the entire share of NPLs held by the lenders last year, posting a 144.67% coverage ratio as a shield against financial shocks.

Bank deposits posted a similar double-digit increase in 2016, although somewhat slower than loan growth. Total deposits grew by 14.3% to hit P9.483 trillion, 70.72% of which was lent out by the banks.

With their upbeat activities, big banks raked in a cumulative net income of P136.956 billion for 2016, surging by 13.9% from a P120.275billion profit posted a year ago.

Cost-to-income ratio logged at 62.96%, a tad lower than the 63.59% tallied in 2015.

Across the entire Philippine banking system, the share of NPLs also dropped to 1.9%, improving from a 2.09% share to total loans. Local lenders saw a 13.9% increase in their cumulative bottom line, which amounted to P154.125 billion in 2016.

The BSP keeps track of the NPL ratios of banks and financial institutions to monitor asset quality and maintain the soundness of the local banking system.