Banks’ soured loans or its non-performing loans (NPL) ratio continued to fall in October to 4.42 percent from 4.44 percent in the previous month, based on the latest data from the Bangko Sentral ng Pilipinas (BSP).
This is the second month in a row that NPL ratio has declined as borrowers were able to pay loans since with the lifting of lockdown measures and opening of businesses, they are able to regain lost incomes.
The October NPL ratio is higher compared to same period in 2020 of 3.72 percent.
The banking sector’s past due loans ratio, in the meantime, also dropped to 5.16 percent from September’s 5.21 percent. It is however higher than October 2020’s 4.83 percent.
Based on BSP numbers, the banking sector’s bad debts totaled P483.98 billion, up from P395.06 billion same period last year. The NPL is however lower than September’s P486.36 billion. NPLs are unpaid and impaired loan accounts for more than 30 days.
The total loan portfolio stood at P10.96 trillion, also higher compared to the previous year’s P10.61 trillion.
Past due loans which are loans whose principal/interest/installment are unpaid past the due date, reached P565.77 billion in October, it is more than the P512.89 billion recorded same period in 2020.
As for banks’ NPL coverage ratio, this improved to 85.41 percent from September’s 84.42 percent but it is lower than 88.03 percent in October last year. Allowance for credit losses reached P413.37 billion, up from same period in 2020 of P347.77 billion, indicating sustained sufficient buffers for loan loss covers.
BSP Governor Benjamin E. Diokno has said that NPL ratio will likely peak at 8.2 percent next year. For 2021, he said earlier that NPL ratio could top six percent.
Diokno said NPLs “remain within manageable levels” and that the operationalization of the Financial Institutions Strategic Transfer or FIST Act will allow financial institutions to “unload their non-performing assets and as a result, enhance their capability to provide financial services to productive sectors of the economy.”
“Despite the increase in NPLs, the banking system remains well-capitalized,” said Diokno.