Keeps accommodative policy
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said he is seeing continued demand for loans and banks’ “appetite” to lend despite that loan growth slowed in August because of risk aversion during the pandemic.
Big banks’ outstanding loans as of end-August increased by 4.7 percent year-on-year, based on BSP data. “This shows that despite the effects of the pandemic, there is still substantial demand for loans and appetite among banks to lend,” Diokno said in an investor roundtable talks hosted by Standard Chartered Bank. The latest bank lending growth is lower compared to end-July’s 6.7 percent mainly on account of weaker corporate sector performance and lower demand during the period.
The BSP, in terms of providing liquidity, an accommodative policy stance and assisting banks to cope with the health crisis, has “done a lot” but Diokno said the BSP’s “toolkit is far from exhausted (we) are prepared to do more, if and when necessary" and this includes further easing monetary policy "in case needed".
“Having said this, the BSP is mindful of the need for careful disengagement of our COVID response measures. We recognize that doing so either too late or too early may have serious repercussions on the economy,” he added.
After several sets of regulatory reliefs to banks, Diokno said their stress tests continued to show favorable banking numbers and “prospects” amid the pandemic-related risks.
“Results show NPLs (non-performing loans) will remain manageable, CARs (capital adequacy ratio) will stay above the 10-percent requirement, liquidity will be sufficient, and profitability will stay intact,” said Diokno.
As of end-August, NPL ratio stood at 2.45 percent. Diokno said NPL ratio was still at modest levels. “We may see an uptick in the NPL ratio in the coming months as a result of the crisis, but we expect the increase to be manageable,” he said.
Data from the BSP showed that gross NPL as of end-August amounted to P232.26 billion from P167.47 billion at the start of the year. Gross NPL ratio net of interbank loans was at 2.45 percent from 1.74 percent in January. The net NPL ratio which in January was at 0.81 percent rose to 1.28 percent by end-August.
A survey from the BSP had indicated that NPL ratio would double to 4.6 percent by end-2020 since borrowers’ capacity to pay was disrupted by the pandemic. This will be the highest NPL ratio in the last 10 years. Last year, NPL ratio was only at 1.6 percent from 1.3 percent in 2018 and 1.2 percent in 2017.
Diokno said it is worth noting that banks have strengthened loan loss provisioning for bad debts. During the same period, NPL coverage ratio was still “standing comfortably”. As of end-August, NPL coverage ratio was at 122.13 percent, up from 106.53 in January.
“Despite the increase in loan-loss provisioning, banks stayed profitable as of end-June, with annualized net profit growing year-on-year by 1.8 percent,” he also pointed out.
As of end-March this year, banks’ CAR stood at 15.3 percent on solo basis and 15.9 percent on consolidated basis, more than the 10 percent minimum requirement of the BSP. “This shows banks have ample capacity to absorb shocks,” said Diokno.
Bank’s liquidity coverage ratio of 171.4 percent as of end-March is also above the regulatory minimum of 100 percent while net stable funding ratio was at 129.1 percent. Diokno said this indicates stable funding to serve customers in the short to medium term.