Thrift banks told to boost buffers as NPLs climb

THE BANGKO SENTRAL ng Pilipinas (BSP) has cautioned thrift banks about the rising share of problem debts in their loans, with the regulator asking players to beef up buffers against potential losses.

BSP Deputy Governor Chuchi G. Fonacier told members of the Chamber of Thrift Banks to raise their allowance for credit losses at a time when the stash of non-performing loans (NPLs) are climbing, even as the industry continues to see upbeat lending activity.

“The industry should however remain vigilant in monitoring the quality of its loan portfolio,” Ms. Fonacier told thrift bank executives on Monday.

NPLs, which cover loans left unpaid for at least 30 days past due date, surged to P47.095 billion as of end-September. This spelled a 16.8% increase from the P40.32 billion worth of soured loans logged a year ago, according to central bank data.

These are considered as risky assets given a slim chance for borrowers to actually pay for their outstanding balances. In turn, this would spell losses for lenders.

The growth in bad debts outpaced a 9.9% increase in total lending of thrift banks, with total credit lines amounting to P907.083 billion as of September.

NPLs took a 5.19% share of the banks’ total loan portfolio, higher than the 4.89% ratio logged in September 2017. Despite this, lenders scaled down their loan loss reserves to P27.114 billion from the P28.179 billion level seen the previous year.

Thrift banks mainly serve individual borrowers and small-scale firms, which are deemed riskier segments compared to corporate clients.

Consumer lending grew by 17.9% in September led by bigger auto, credit card and salary-based credit lines granted compared to a year ago.

“Even though this is far from being worrisome, we encourage the industry to continue efforts to strengthen the quality of credit risk management systems in line with expansion in lending activity,” Ms. Fonacier said.

Still, the thrift banking sector continues to show “promising” growth, the BSP official said, as