Bad loans ratio improves to 4.08% in March

Banks’ non-performing loans (NPL) ratio dropped to 4.08 percent as of end first quarter, its lowest since December 2021, based on Bangko Sentral ng Pilipinas (BSP) data.

The soured loans ratio in March was lower from endFebruary’s 4.24 percent and from 4.21 percent same period in 2021.

NPLs are unpaid loans for more than 90 days and are considered impaired loan accounts. The NPLs on a year-on-year basis slightly increased by 2.67 percent to ₱460.46 billion from ₱448.44 billion, but lower by 2.58 percent from end-February’s ₱472.66 billion.

The industry’s total loan portfolio in the first quarter was up by 5.82 percent to ₱11.28 trillion versus ₱10.66 trillion same time in 2021.

Meantime, banks’ past due ratio which is the delinquency rate also fell to 4.83 percent in March compared to five percent in end-February, and 5.34 percent same period in 2021.

Banks’ past due loans decreased by 4.39 percent to ₱544.59 billion versus ₱569.64 billion last year. It was also down from ₱557.96 billion in endFebruary. Loan accounts are considered past due if unpaid on due dates but banks may provide a cure period within 30 days to allow borrowers to catch up.

Based on BSP data, the industry’s NPL coverage ratio stood at 88.38 percent. This was higher compared to end-February’s 86.12 percent and from March 2021’s 83.24 percent.

Banks’ allowance for credit losses grew by nine percent to ₱406.97 billion versus ₱373.28 billion in 2021. Provision for credit losses have risen since 2020 to cover for loan losses due to the extended pandemic lockdowns and as a result of the two Bayanihan laws.

The 45 commercial and universal banks accounted for the lion’s share of the banking systems’ capital with 92-95 percent.

As of end-March, big banks’ NPL ratio also improved to 3.73 percent as was reported on Monday, May 16.