Thrift banks’ NPLs up at end-March

SOURED LOANS held by thrift banks posted a double-digit increase in March as they extended larger credit compared to yearago levels, latest central bank data bared.

Non-performing loans (NPLs) held by thrift banks reached P40.069 billion at end-March, up from P39.323 billion as of endFebruary and surging by 16.7% from a P34.346-billion tally as of March 2016. NPLs refer to debts left unsettled at least 30 days past due date, and are considered at risk of default.

The growth in NPLs even outpaced the 8.8% growth in total loans handed out by the banks that totalled P792.147 billion from P728.258 billion a year prior. The stash of soured debts also grew faster than the 11% increase in bank deposits, which reached P900.147 billion as of March.

On the other hand, nonperforming assets in the form of real property and other items of value seized from non-paying clients posted a minimal climb to P23.128 billion from P22.715 billion previously. Banks usually recover loan losses by foreclosing the assets used as collateral by clients in signing a loan agreement.

With the bigger share of soured debts, the banks decided to hike the amount they set aside for potential credit losses to P27.883 billion, or 11.5% higher than the P25.001 billion in reserve funds allotted in March 2016.

Still, the buffers could not fully cover the NPL stash at just 69.59% of the soured loans. This share is even lower than the 72.79% coverage ratio posted a year ago, according to BSP data.

Despite this, the thrift banks yielded a cumulative P3.777- billion net income during the first quarter, jumping by 27.4% from the P2964 billion in profits generated during the comparable yearago period, according to central bank data.

The lenders also reported a lower cost- to- income ratio at 63.23% in March, better than 65.94% from a year prior.

Profits across the entire Philippine banking system slipped to a cumulative P38.347 billion for the first three months of 2017 from P38.731 billion recorded a year prior. On the other hand, the share of NPLs dropped to 2% of total loans, improving from 2.24% the previous year.

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