Big banks’ soured loans extend increase in Jan.

SOURED DEBTS held by big banks continued to rise in January, but maintained a modest share even as loans surged by nearly a fifth from last year, latest central bank data showed.

Non-performing loans (NPLs) hit P101.391 billion as the year opened, according to the Bangko Sentral ng Pilipinas (BSP). This spelled a 6.5% increase from the P95.172 billion in bad debts recorded in January 2017, and inched up from the P97.531 billion tally as of end-December.

NPLs refer to debts left unpaid for at least 30 days beyond due date. These are considered as risky assets given the slim chance of borrowers actually settling their outstanding balances.

The slight pickup in bad loans held by universal and commercial banks compares to a surge in total lending, which jumped 18.3% to P7.827 trillion from P6.615 trillion the prior year.

The bad debts only accounted for 1.3% of the banks’ total loan portfolio, a marked improvement coming from a 1.44% share in January last year. This also signalled improving asset quality, as this meant that banks are still able to generate returns from lending activities.

The banks decided to set aside P148.978 billion as reserves versus potential credit losses, which is higher than the P136.929 billion allowance a year ago. The amount is more than enough to cover the entire NPL stash held by the banks as of January, giving lenders a degree of comfort.

On the other hand, non-performing assets held by the lenders steadied at P77.252 billion. This includes real property and other items of value which were seized from clients for failing to pay their dues.

Banks also remained fairly liquid as deposits grew by 13.5% to P10.635 trillion. Loans accounted for just 73.6% of this sum, data showed. Liquid assets also totalled P5.215 trillion.

The BSP requires big banks to set aside 20% of deposits as reserves as a buffer against a potential funding crunch. The figure has been trimmed to 19% effective March, following an “operational” adjustment announced by the Monetary Board last month. This essentially leaves banks room for even greater lending.

Big banks operating in the Philippines raked in a cumulative P146.33 billion in net profits last year, up by 6.8% from the P136.956 billion they made in 2016. This came on the back of a 17.3% increase in bank credit to reach P7.867 trillion.

Still, soured debts settled at just 1.24% of the loan portfolio at P97.531 billion.

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