Banks’ soured loans or non-performing loan (NPL) ratio increased to 4.14 percent in January from same period in 2021 of 3.72 percent, according to Bangko Sentral ng Pilipinas (BSP) data.
The latest gross NPL ratio was also higher compared to December 2021 of 3.97 percent.
As of end-January, the banking sector’s total loan portfolio amounted to P11.14 trillion, up by almost five percent year-on-year from P10.62 trillion.
NPLs, which are unpaid and impaired loan accounts for more than 30 days, increased by 16.74 percent in January to P461.66 billion versus P395.46 billion same time in 2021.
The banking sector’s bad loans continue to be supported by adequate loan-loss provisioning. Based on BSP data, the industry’s allowance for credit losses grew by 8.54 percent to P402.89 billion in January compared to P371.17 billion same time last year.
NPL coverage ratio, meantime, fell to 87.27 compared to 93.86 in January 2021. In December 2021, NPL coverage ratio was at 87.37.
Banks’ past due ratio or the delinquency rate in January stood at 4.84 percent, higher than 4.79 percent in January 2021 and from 4.66 percent in December 2021.
Past due loans totalled P539.42 billion which was up by 5.98 percent compared to P508.96 billion same period in 2021.
Credit rating agency S&P Global in a February report said the NPL ratio has peaked and “is likely to gradually decline, supported by recoveries and write-offs (and) most stressed loans have either been recognized or restructured.”
The last time NPL ratio was around the 4.14 percent level was in December 2008 of 4.11 percent, in July 2009 at 4.20 percent and in March last year at 4.21 percent.
In 2021, the second year of the COVID-19 pandemic, NPL ratio reached a peak of 4.51 percent in July and August.
BSP’s simulations earlier pointed to a possible peak of 8.2 percent in NPL ratio this year. However, the central bank said NPL ratio will continue to be manageable due to 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. The FIST law is expected to further reduce NPL ratio by about 0.6 to 5.8 percentage points in the next three to four years.