Thrift banks’ NPL ratio rises at end- September
THRIFT BANKS saw the share of bad loans in their total lending business rise by more than a fifth in September, outpacing a surge in total debts handed out by these firms, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Non-performing loans (NPLs) incurred by thrift banks took a 5.02% share against their total loan portfolio for the month, rising from a 4.56% ratio posted in September 2015. The figure, however, was slightly below the 5.07% share seen the prior month.
NPLs represent debts left unsettled at least 30 days past their due date. Soured loans held by the thrift banks reached P37.414 billion that month, 22.7% higher than the P30.503 billion it carried a year ago. Bad debts grew faster than the 11.5% increase in total credit handed out by the banks, which rose to P745.564 billion from P668.457 billion previously.
Unlike universal and commercial banks which are tapped by conglomerates and large firms for credit, thrift banks are focused on lending to retail consumers.
The thrift lenders also incurred a bigger share of non-performing assets as it held P22.588 billion worth of seized properties from defaulting borrowers, 5.6% higher than the P21.399 billion seen the prior year.
With the bigger stash of soured debts, the lenders hiked their allowance for credit losses to P26.44 billion, up by 20% from the previous year’s P22.036-billion margin. As a result, reserves against potential defaults rose to a 3.55% share from 3.3%.
Despite the higher credit allowance, overall NPL coverage slid to 70.67% in September, coming from a 72.24% buffer laid out a year ago.
As of end- September, the share of NPLs across the entire Philippine banking system stood at 2.14% or P150.285 billion. Banks remain armed with more than enough buffers against loan defaults as total coverage hit 113.17%, led largely by universal and commercial banks.
The share of bad loans dropped from a 2.32% ratio in September 2015, which signalled improving asset quality among local players.
The BSP keeps track of the NPL ratios of banks and financial firms to monitor asset quality and maintain a sound and stable banking system.
Despite the increasing share in bad loans, thrift banks remained profitable during the first nine months of the year with a cumulative net income at P10.47 billion, 24% higher than the P8.443 billion it booked during the comparable period in 2015.
There are 63 thrift lenders operating in the Philippines as of end-June, according to latest central bank data.