Big banks’ NPLs inch up in April as lending surges
SOURED DEBTS held by big banks stayed relatively modest in April even as lending surged by almost a fifth, latest central bank data showed.
Non-performing loans (NPLs) incurred by universal and commercial banks climbed to P106.408 billion for the month, inching up from P104.4 billion tallied as of March and 5.2% higher than the P101.189 billion posted in April 2017.
NPLs are loans left unsettled at least 30 days past due date. These are considered risky assets given the slim chance of borrowers actually settling their outstanding balances, which would mean losses for the lender.
According to the Bangko Sentral ng Pilipinas (BSP), the pickup in problem debts is minimal compared to brisk lending activity. Total loans granted by big banks jumped by 19.4% to hit P8.054 trillion as of April, surging from the P6.745 trillion level the prior year.
Soured debts took up a 1.32% share relative to the total loan portfolio, even improving from a 1.5% ratio logged in April last year.
Banks also beefed up buffers to cover potential losses, with the amount growing to P160.884 billion. This is 15% higher than the P139.798 billion set aside as reserves for loan losses during the same year-ago period.
This is enough to cover 1.5 times the NPL stash, which meant that banks can maintain their solid financial footing even if these bad loans are written off.
On the other hand, non-performing assets kept by the lenders steadied at P76.774 billion, little changed from March’s level. The amount includes the value of real property and other items of value that were seized from clients for failing to pay their dues.
Banks also remained liquid as they accepted more deposits, with their base expanding by 13.9% to reach P10.84 trillion compared to P9.521 trillion a year ago. Granted loans took 74.3% of the deposits, improving from 73.62% in March and the 70.84% ratio posted in April 2017.
The central bank has trimmed the reserve requirement on big banks to 19%, effectively unlocking at least P90 billion for additional lending. This was further reduced to 18% starting June.
Big banks in the Philippines booked a cumulative P39.768 billion net income during the first quarter, which meant a 17.8% increase from P33.745 billion profits during the same period last year.
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.