Banks’ bad loans surge at end-Jan

SOURED loans posted by the Philippine banking system picked up to over P392 billion as of January this year, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary central bank data showed over the weekend that lenders’ gross nonperforming loans (NPL) rose to P392.25 billion at end-January, surging by 66.92 percent from P234.98 billion a year ago.

NPLs are past due loans where the principal or interest is unpaid for 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.

The data also showed that banks’ total loan portfolio declined by 2.57 percent to P10.60 trillion at endJanuary from P10.88 trillion a year before.

This translated to a gross NPL ratio of 3.70 percent, an uptick from the 3.61 percent a month earlier and from 2.16 percent a year ago.

This ratio is the share of bad loans to total loans, inclusive of interbank loans. The latest NPL ratio is the highest in 10 years, or since

January 2011’s 3.74 percent.

The Bangko Sentral said earlier the Financial Institutions Strategic Transfer o FIST Act could cut the NPL ratio of banks by as much as 7 percentage points.

“FIST is expected to reduce the NPL ratio by about 0.63 to 7.0 percentage points,” BSP Governor Benjamin Diokno has said.

According to him, the new law will allow lenders to easily dispose bad assets through asset management companies, and help keep the banking system stable despite the impact of the

coronavirus pandemic.

Signed by President Rodrigo Duterte last February 16, FIST provides a legal framework and tax incentives for banks and other financial institutions to transfer their nonperforming assets to special-purpose firms, called FISTCs.

It covers assets that have become nonperforming on or before Dec. 31, 2022.

Due to space limitations, Deloitte on the Dot is published on our website at www.manilatimes.net/business/ columnists-business.