Banks’ bad loans ratio further eases to 3.53%

The share of soured loans to the total loans of Philippine banks eased for the sixth straight month to 3.53 percent in August from the revised 3.57 percent in July, according to the Bangko Sentral ng Pilipinas (BSP).

This was the lowest non-performing loan (NPL) ratio for the country’s banking sector since the 3.51 percent recorded in September 2020. The NPL has been declining since March this year.

The NPL ratio of Philippine banks peaked at 4.51 percent in July and August last year as the economy struggled due to the impact of the COVID-19 pandemic.

The bad debts of Philippine banks continued to drop, declining by 15 percent to P418.01 billion in end-August from P491.93 billion in the same period last year.

Credit growth picked up to 8.6 percent as banks disbursed P11.84 trillion in August from P10.9 trillion a year ago as the economy further reopens form strict COVID quarantine and lockdown protocols.

Likewise, the banking sector’s past due loans decreased by 14.4 percent to P496.13 billion from P579.6 billion.

On the other hand, the restructured loans of banks slipped by 4.4 percent to P319.89 billion in August from P334.62 billion in the same month last year.

Meanwhile, allowance for credit losses inched up by 1.7 percent to P418.06 billion in end-August from P410.85 billion a year ago. This translated to a loan loss reserve level of 3.53 percent and an NPL coverage ratio of 100.1 percent.

The BSP earlier projected that the NPL ratio of Philippine banks would accelerate and peak at 8.2 percent this year.

Joyce Ong, analyst for financial institutions group at Moody’s Investors Service, earlier said the banking sector’s NPL ratio already peaked at 4.51 percent last year.

Ong told reporters that the ratio of bad debts to the industry’s total loan book would continue to slowly go down over the next one to two years.

“With the reopening of the economy in the second half last year, we’ve seen a decline in NPL ratio because of the rebound of economic activities that really slow the whole formation of that loans,” Ong said.