Banks’ NPL, PDL ratios rise in March – BSP

Published May 11, 2021, 11:48 AM

by Lee C. Chipongian

Banks continue to report an increasing gross non-performing loans (NPL) ratio of 4.21 percent and past due ratio of 5.34 percent in March in an expected trend resulting from borrowers’ difficulty in paying their loans amid the public health crisis.

The last time gross NPL was at this level was in March 2009 and in November 2008 for the past due ratio, based on Bangko Sentral ng Pilipinas (BSP) data. The soured loans ratio first went past four percent, and five percent for the past due ratio, in February this year. At the end of 2020, the first pandemic year, the gross NPL ratio was at 3.63 percent and the past due ratio was at 4.46 percent.

Gross NPL ratio was up from 4.08 percent in February this year and from 2.25 percent same time in 2020. NPLs are impaired or unpaid loans both principal and interests for more than 90 days.

Past due ratio in March stood at 5.34 percent, also up from February’s 5.21 percent and from 3.10 percent in March 2020. Past due loans (PDL) are unpaid loans after its due date or unpaid loans for 30 days or more.

Gross NPLs amounted to P448.593 billion in March against a total loan portfolio of P10.658 trillion. This was more than P431.266 billion gross NPLs and total loan portfolio of P10.579 trillion in February.

PDLs, in the meantime, increased to P568.974 billion in March from P551.472 billion in February.

Big banks’ gross NPL ratio went up to 3.73 percent from 3.56 percent in February while past due ratio rose to 4.64 percent from 4.47 percent in the same period.

The 46 universal and commercial banks incurred NPLs of P362.038 billion in March, of its total loan portfolio of P9.718 trillion. PDLs amounted to P451.226 billion.

Thrift banks’ gross NPL ratio however improved to 8.10 percent with a total P63.414 billion NPLs of its total loan portfolio P782.617 billion. Last February, its gross NPL ratio stood at 8.28 percent. Past due ratio also improved to 11.46 percent from 11.89 percent previously, with PDLs amounting to P89.692 billion.

The central bank monitors banks’ loan quality as part of its supervisory efforts to ensure financial stability and sound credit risk management. The assessment of banks’ loan quality has also been adjusted due to the pandemic and other factors such as relief measures provided by the BSP to both banks and non-banks.

NPL ratios indicate a weakness in the financial system and “poor state of the economy” when it is on the high side. Based on a BSP survey of banks, they had predicted an NPL ratio of 4.6 percent by end-2020 but the actual ratio was below that at 3.63 percent (versus 2.04 percent in 2019, pre-pandemic).

For this year, an industry survey and credit watchers said NPL ratio will reach six percent as an impact to the two Bayanihan laws’ grace periods and borrowers’ difficulty in meeting their obligations.

The latest loan quality indicators also reflect big banks and thrift banks’ continued high provisioning for loan loss reserves. In March, the banking industry’s NPL coverage ratio stood at 83.09 percent from 86.64 percent in February.

Banks set aside P372.720 billion allowance for credit losses in March compared to P373.361 billion in February. 

In its latest “Report on the Philippine Financial System”, the BSP said 85 banks have applied to exclude P18.8 billion of soured loans from the NPL and PDL classification until end-December this year. This was part of BSP relief measures where it is allowing its supervised financial institutions or BSFIs to exclude the exposures of borrowers affected by pandemic from the determination of a BSFI’s NPLs and PDLs.

The report said about 2.8 percent or P12.2 billion of NPLs, and 1.2 percent or P6.6 billion of PDLs were considered loans under regulatory forbearance. The BSP said this is still a minimal amount. Of 85 banks, 74 are rural and cooperative banks, four are big banks and five are thrift banks. The other two are non-banks.

The BSP said however that the forbearance measure on the exclusion of the PDL and NPLs “will not significantly affect” the reported past due loans and NPLs of the banking system.