Thrift banks’ nonperforming loans rise in Aug.

SOURED DEBTS held by thrift banks posted a minimal increase in August even as loans jumped by a tenth from a year ago, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Nonperforming loans (NPLs) held by these thrift lenders rose by 7.5% during the month to P40.36 billion from the P37.555 billion in bad debts held as of August 2016, according to data from the BSP. The figure also moved a tad higher than the P40.313 billion in risky loans tallied as of end-July.

NPLs refer to debts left unpaid at least 30 days beyond due date, and are considered as risky assets as these have high risk of default.

The slight rise came alongside a 10.7% increase in total loans granted by the thrift banks, which soared to P819.487 billion from P740.158 billion a year ago, according to central bank data.

The bad debts took a 4.93% share relative to the banks’ total loan portfolio, which is lower than the 5.07% NPL ratio tallied the previous year.

Thrift banks are focused on lending to consumers and smallscale firms, which sets them apart from the operations of the bigger universal and commercial banks who lend to corporate clients. This explains the higher NPL ratio compared to the 1.46% share in the loans held by big banks, as the retail segment is deemed more risky.

On the other hand, the value of nonperforming assets held by the thrift units slid to P21.213 billion, down 6.2% from the P22.613 billion worth of idle properties seized by the banks from nonpaying clients.

Banks have the option to seize assets of value such as homes and cars from defaulting clients which were posted as loan collateral, in order to recover losses from the credit default.

For August, banks chose to hike the allowance they set aside for potential credit losses to P28.175 billion, up 7.6% from a year ago to match the increase in bad loans incurred by the lenders. However, the amount was still not enough to entirely cover the NPL stash, as it can only make up for 69.81% of the unsettled amounts.

Despite this, thrift banks continued to enjoy strong growth in their asset base, with deposits posting a 12.6% growth to reach P929.437 billion, coming from just P825.546 billion the year prior. Of the amount, 88.17% were handed out as loans.

With the solid growth in bank lending, thrift units continued to enjoy higher profits as of endJune with a cumulative bottom line worth P8.174 billion. This amount is 20.9% higher than the P6.759-billion net income posted during the comparable period in 2016, according to latest BSP data.

The central bank monitors the NPL ratios of banks and financial firms in order to keep track of asset quality and maintain the soundness of the financial system.