Banks bring down bad loans ratio

Universal and commercial banks improved their non- performing loan ratios as of February this year compared with last year’s level the, Bangko Sentral ng Pilipinas data reported yesterday.

Big banks’ NPL ratio went down to 1.96 percent in end-February from 2.22 percent in the same period last year despite a rise in bad loans.

Banks increased their total loan portfolio by 15 percent to P4.87 trillion from P4.25 trillion, while their soured loans went up two percent to P95.66 billion from P94.24 billion.

NPLs refer to obligations that remain unpaid for at least 30 days after the due date. The NPL ratio, meanwhile, is the amount of bad loans measured against the total loan portfolio.

But even with a write-off of these bad loans, banks are not expected to suffer due to enough reserves they have set aside.

Loan loss reserves reached 140.46 percent of their gross NPL as of end-February, higher than the 138.21 percent recorded in the same period last year.

Universal and commercial banks continue to hold the bulk of the industry’s total resources last year. These resources, made up of deposits, profits, retained earnings, and others, indicate their ability to fund the credit needs of their clients and also show they have enough buffer against external shocks.

Last year, banks grew their resources by 12 percent to P11.52 trillion from P10.31 trillion in 2013. Ninety percent or P10.4 trillion of these resources are held by universal and commercial banks.

Thrift banks accounted for P916.2 billion of the resources last year, while rural banks had P209 billion.