Thrift banks’ non-performing loans rise at end-March

SOURED DEBTS held by thrift banks picked up anew in March to outpace the growth in total loans, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Non-performing loans (NPLs) held by these lenders stood at P44.633 billion, 11.4% higher than the P40.069 billion in soured debts incurred in March 2017.

The rise in bad loans outstripped the growth in total lending, which picked up by 9.3% to hit P865.484 billion. Outstanding loans stood at P792.147 billion a year ago, according to central bank data.

NPLs refer to unsettled debts for at least 30 days past due date. These are considered as risky assets due to a high risk of default, which would spell losses for the bank.

The soured loans accounted for 5.16% of total loans, taking a bigger share compared to 5.12% in February and from the 5.06% ratio posted a year ago.

Apart from these bad loans, non- performing assets in the form of seized properties amounted to P19.058 billion, roughly the same level from the previous year. This represents the value of land and other assets of value seized from non-paying clients in a bid to settle their outstanding obligations.

Despite the higher stash of problem loans, thrift banks dialled down the reserves for potential credit losses. The figure stood at P26.654 billion as of March, 4.4% lower than the P27.883 billion which was set aside the prior year.

Loan loss reserves can cover 59.72% of the entire NPL stash, dropping from a 69.59% coverage ratio in March 2017.

Thrift banks primarily target retail clients and small-scale firms, which are deemed riskier segments due to bigger chances of default. Consumer lending grew by 19.3% year-on-year, although slower than the 19.9% clocked in February.

On the other hand, deposits accepted by thrift lenders grew to P935.517 billion, 3.9% higher than the P900.147 billion deposits the previous year but at a slower pace compared to the surge in lending.

There are 55 thrift lenders operating in the Philippines as of December. These banks made a cumulative P4.05 billion net income during the first quarter, 7.2% higher than the P3.777 billion raked in during the comparable period in 2017.

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

Fitch Ratings said local banks could see a bigger share of bad loans as they extend bigger credit lines to the consumer and small business segments, but such a risk will remain “manageable” as firms enjoy favorable operating conditions. •