Bad loans ratio drops to 22-month low

Banks’ gross non-performing loans (NPL) ratio decreased to a 22-month low of 3.57 percent in July, according to data from the Bangko Sentral ng Pilipinas (BSP).

The soured loans ratio is lower compared to same period last year of 4.51 percent and from June this year’s 3.60 percent. The last time NPL ratio was below 3.60 percent was in September 2020 at 3.51 percent. The highest NPL ratio for 2022 was in February of 4.24 percent.

Money/File (Manila Bulletin article)

NPLs, which are unpaid loans for more than 90 days, decreased by 13.7 percent year-on-year to P420.25 billion from P487 billion in 2021.

The total loan portfolio during this period, meantime, went up by 8.97 percent to P11.77 trillion from P10.80 trillion.

As of end-July, banks’ NPL coverage ratio increased to 99.16 percent versus 82.44 percent same period last year. It is also more than June’s 97.08 percent.

For loan loss reserves, banks’ allowance for credit losses rose to P416.73 billion, up by 3.79 percent from P401.50 billion in 2021. Provisioning for loan losses were also higher than June’s P409 billion.

Banks’ past due ratio which is the delinquency rate, stood at 4.17 percent during the period, lower compared to same period last year of 5.31 percent, and from 4.19 percent in June.

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-July, past due loans decreased by 14.38 percent to P491.29 billion from P573.78 billion.

Based on the latest Banking Sector Outlook Survey for the second semester of 2021, the BSP said most banks expect to have adequate capital, liquidity buffers and ample loan loss reserves in the next two years.

About 57.3 percent of surveyed banks said the industry NPL ratio will likely stay above five percent in the next two years. The survey result is lower than 63.5 percent same time in 2020. About 42.7 percent of respondents project an NPL coverage ratio in the range of 51 percent to more than 100 percent.

The BSP noted mixed projections on restructured loans with 30.1 percent of surveyed banks estimating a restructured loan ratio of more than five percent. About 23 percent expect a more conservative restructured loan ratio of one percent to two percent because of banks’ relief measures given to their borrowers.