PH banks’ bad loans soar to P481 billion

THE amount of bad loans in the Philippine banking sector rose to P481 billion at the end of November 2021, according to data issued by the Bangko Sentral ng Pilipinas (BSP) on Tuesday.

At the end of November, gross nonperforming loans (NPLs) incurred by lenders had climbed by 19.07 percent to P481.87 billion, up from P404.68 billion a year earlier.

NPLs are past-due loans with an outstanding principal or interest balance of 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.

At the end of November, banks’ total loan portfolio fell by 0.06 percent to P10.61 trillion, down from P10.62 trillion a year ago.

This translates to a gross nonperforming loan ratio of 4.35 percent, which is lower than the 4.42 percent recorded in October 2021 but higher than the 3.81 percent recorded a year ago. This figure represents the percentage of problematic loans among all loans, including interbank loans.

Bad loans in the Philippine banking system are expected to worsen in 2021 and this year, with their share of total loans set to peak at 8.2 percent, according to the central bank.

Banks expect their NPL percentage to be between 5 and 6 percent by the end of 2021, BSP Governor Benjamin Diokno pointed out. This year, it is seen to reach an alltime high of 8.2 percent.

“The estimated NPL ratio this year and next year is significantly lower, and that experienced by the banking system during the Asian financial crisis,” he noted, and “will decline in the years thereafter.”

The banking

ratio will remain in the single digits, Diokno stressed, thanks to banks’ prudent credit risk

management standards and the implementation of the Financial Institutions Strategic Transfer Act, which will provide lenders with a stand-by facility to offload nonperforming assets if they experience a sharp increase.