Banks’ bad debts rise, still deemed man­age­able

Business World - - FRONT PAGE - Melissa Luz T. Lopez

BAD DEBTS held by big banks grew in May but ac­counted for a small share of to­tal lend­ing, ac­cord­ing to lat­est data re­leased by the Bangko Sen­tral ng Pilip­inas (BSP).

Non-per­form­ing loans (NPLs) held by univer­sal and com­mer­cial banks to­talled P109.176 bil­lion, ris­ing from P106.408 bil­lion in April and up 8.8% from the P100.318 bil­lion in May 2017.

NPLs re­fer to loans left un­paid at least 30 days past due date. These are con­sid­ered risky as­sets given a slim chance of bor­row­ers ac­tu­ally set­tling their out­stand­ing bal­ances, which would mean losses for the lender.

Still, the pickup in soured debts clocked in slower than the 17.3% rise in to­tal lend­ing. Out­stand­ing credit lines to­talled P8.147 tril­lion, which surged from P6.947 tril­lion in May last year.

NPLs also re­mained man­age­able de­spite brisk lend­ing ac­tiv­ity. These prob­lem loans ac­counted for just 1.34% of to­tal lend­ing, lower com­pared to the 1.44% share tal­lied a year ago.

Lenders beefed up pro­vi­sions against pos­si­ble credit losses. Loan loss re­serves went up 14.2% to P158.478 bil­lion from the P138.755 bil­lion set aside the pre­vi­ous year. The amount is more than enough to cover the un­set­tled dues, which meant that banks can main­tain their fi­nan­cial foot­ing even if these bad loans were writ­ten off.

On the other hand, banks’ non- per­form­ing as­sets in the form of real prop­er­ties amounted to P76.656 bil­lion, slip­ping from P77.973 bil­lion the past year. The amount in­cludes the value of real prop­erty and other items of value which were seized from clients for fail­ing to pay their debt.

Banks also re­mained fairly liq­uid as the loan-to-de­posit ra­tio stood at 74.6% as of end-May, higher than the 72.12% level tal­lied a year ago. Loans are funded largely by a solid de­posit base, which grew 13.4% to hit P10.921 tril­lion.

The BSP mon­i­tors the NPL ra­tios of banks and fi­nan­cial firms

in or­der to mon­i­tor as­set qual­ity and main­tain the sound­ness of the fi­nan­cial sys­tem.

Re­cent in­ter­est rate hikes from the BSP are not ex­pected to lead to big­ger loan de­faults, Moody’s In­vestors Ser­vice has said. Moody’s se­nior an­a­lyst Si­mon Chen has said he ex­pects tight­en­ing by cen­tral bank to be “grad­ual and modest,” hence, will not lead to sig­nif­i­cant as­set qual­ity pres­sures for lenders and will re­main man­age­able for both cor­po­rate and re­tail bor­row­ers. —

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