Bad loans ratio unchanged in August

Published October 1, 2021, 6:02 PM

by Lee C. Chipongian

Banks’ non-performing loans (NPL) ratio still remained unchanged at 4.51 percent in August from the previous month, July, the Bangko Sentral ng Pilipinas (BSP) reported.

The total bad loans reached P491.93 billion in August or 61.28 percent from P304.99 billion the same month last year.

Compared to the previous month, soured loans in August slightly increased by one percent or from P487.05 billion in July, BSP data showed.

NPL ratio, in the meantime, was higher than same period last year of 2.84 percent. NPLs are unpaid and impaired loan accounts for more than 30 days.

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The total loan portfolio in August of P10.89 trillion was 1.4 percent higher than same period in 2020 of P10.75 trillion.

Past due ratio or the delinquency rate in August was slightly higher at 5.32 percent from July’s 5.31 percent. Past due loans (PDL) amounted to P579.60 billion which is two percent higher than P567.84 billion same time last year. These are loans whose principal/interest/installment are unpaid past the due date.

Banks’ NPL coverage ratio continued to improve to 83.52 percent from 82.44 percent in the previous month.

Banks set aside P410.85 billion allowance for credit losses against the total loan portfolio during the period. Loan loss reserves to the total loan portfolio was up at 3.77 percent in August from 3.72 percent in July.

The last time NPL ratio was near the 4.51 percent level was in June 2008 with 4.49 percent and at 4.52 percent of September of the same year.

BSP Governor Benjamin E. Diokno said last week that NPL ratio will likely peak at 8.2 percent in 2022. By the end of this year, bad loans ratio will also exceed the six percent level already.

Diokno however said that NPL ratio will remain at single digit range and will not reach the levels seen during the 1997 Asian Financial Crisis when NPL ratio peaked at 18 percent.

Diokno is confident that the NPL ratio will remain at single-digit level because of local banks’ prudent credit risk management standards and the operationalization of the Financial Institutions Strategic Transfer (FIST) Act which will help banks dispose of its non-performing assets and will also reduce NPL ratio.

He said a few banks have already expressed interests in disposing their NPAs under the FIST Act which could further reduce the NPL ratio by 0.6 to 5.8 percentage points over a four-year period.

 
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