Big banks’ bad loans ratio improves

Published May 16, 2022, 5:02 PM

by Lee C. Chipongian

The country’s 45 universal and commercial banks’ non-performing loans (NPL) ratio improved to 3.73 percent as of end-March, the lowest since December 2021.

The Bangko Sentral ng Pilipinas (BSP) has yet to release the whole banking industry gross NPLs and NPL ratio for the first quarter period, but issued the March data for big banks only on Monday, May 16.

BSP building and logo

Big banks’ NPLs increased to P394.63 billion as of end-March, up by nine percent from same period last year of P362.04 billion. NPLs are unpaid loans for more than 90 days and are considered impaired loan accounts.

Compared to end-February’s P405.68 billion, big banks’ gross NPL improved by 2.72 percent, based on BSP data.

Big banks improve NPL ratio

The large lenders’ NPL coverage ratio was higher at 92.20 percent versus end-February of 89.72 percent and same period last year of 89.97 percent. The allowance for credit losses were almost unchanged at P363.85 billion from the previous month’s P363.98 billion, but higher from same period last year of P325.73 billion.

Meantime, past due loans was up by 1.41 percent to P457.61 billion end-March from P451.23 billion in 2021, but lower than end-February this year of P467.64 billion.

Loan accounts are considered past due if unpaid on due dates but banks may provide a cure period within 30 days to allow borrowers to catch up. As of end-March, the past due loan ratio of 4.33 percent was lower than 4.64 percent last year.

BSP data showed that big banks’ total loan portfolio stood at P10.57 trillion in the first quarter this year, higher by 8.73 percent from P9.72 trillion in 2021.

As of end-February, which was the latest data, the entire industry’s NPL ratio stood at 4.24 percent which was the highest since March 2021 of 4.21 percent. It was also higher compared to same period last year of 4.08 percent.

BSP Governor Benjamin E. Diokno expects banks’ NPL ratio to continue to remain manageable as the economy recovers. The GDP expansion of 8.3 percent in the first quarter – higher than consensus projections – bodes well for the banking industry’s outlook in the coming months.

The economy has been steadily growing in the last four consecutive quarters, reversing the pandemic-induced contractions between the first quarter 2020 to the first quarter in 2021.

The BSP expects strong GDP growth this year of seven percent to nine percent. To ensure growth continues, the BSP implemented timely financial relief measures to banks to boost bank lending and ensure a manageable NPLs and NPL ratio.

The central bank’s pandemic response are its low two-percent policy rate, provisional advances extended to the government which was worth P1.1 trillion, and time-bound regulatory and operational relief measures.