Banks’ NPL ratio remains manageable – BSP

The country’s 36 big banks continue to report low gross non-performing loans (NPL) ratio of 1.75 percent as of endNovember 2015 from 1.77 percent of the previous month.

NPLs which are unpaid loans (principal and interests) for more than 30 days, and its ratio to total loan portfolio has been below two percent since November 2014, according to the Bangko Sentral ng Pilipinas (BSP).

“The latest loan quality indicators reflect universal/commercial banks’ continued adherence to high credit standards,” said the BSP in a statement. The central bank monitors banks’ loan quality as part of its supervisory efforts to ensure financial stability specifically a “sound credit risk management” in the banking sector.

The BSP said that as of end-November, banks’ total loan portfolio “rose at a slightly faster pace than their gross NPLs month- on-month.” The total loan portfolio increased 1.6 percent monthon-month to 5.44 trillion while gross NPLs went up by a mere 0.9 percent to 95.37 billion.

“While the ( big banks) industry maintained a low NPL ratio, it continued to set aside adequate reserves for potential credit losses,” said the BSP. In the same period, the banking sector set aside loan loss provisioning for 139.98 percent of its gross NPLs. The NPL coverage ratio stood at 140.97 percent a month earlier.

The BSP noted that the big lenders’ gross NPLs remained manageable across economic such as in financial and insurance activities, real estate, manufacturing, wholesale and retail trade, and electricit/ gas/ steam/ airconditioning supply. These sectors accounted for 69.2 percent of the banks’ total loan portfolio in November 2015.

While lagging a bit in reporting, the BSP also disclosed thrift banks’ gross NPL ratio of 4.56 percent as of endSeptember, 2015 to 688.46 billion.

The comparison given was on a quarterly basis and it showed that thrift banks’ NPL ratio improved from endJune 2015’s 4.69 percent.

The 70 thrift banks reported an NPL of 30.50 billion, up 1.84 percent from the previous quarter. Its total loan portfolio increased by 4.75 percent to 688.46 billion.

The BSP added that the mid-sized banks had reserves for potential credit losses of 72.24 percent of their gross NPLs, which was higher than 71.63 percent from end- June.

Its gross NPLs remained manageable across economic sectors as seen in real estate activities; loans to individuals for consumption purposes; wholesale and retail trade and repair of motor vehicles and motorcycles; and financial and insurance activities. All these accounted for 75 percent of the banks’ total loan portfolio at the end of the third quarter.