Bad loans ratio continues to improve
Banks’ gross non-performing loans (NPL) or bad loans ratio improved to 3.43 percent in September from 3.53 percent in August as borrowers were paying their debts on time.
Based on the latest Bangko Sentral ng Pilipinas (BSP) data, the last time NPL ratio was near the 3.43 percent level was back in September 2020 with 3.51 percent.
In the same period last year, NPL ratio was still high at 4.44 percent. During the pandemic, the highest recorded NPL ratio was 4.51 percent in July and August 2021.
Total NPLs, which are unpaid loans for more than 90 days, amounted to P415.225 billion as of end-September, down by 14.63 percent compared to same period last year of P486.362 billion.
The banking industry’s total loan portfolio increased by 10.27 percent to P12.09 trillion from P10.964 trillion in 2021.
Meantime, banks’ NPL coverage ratio was higher at 102.27 percent versus 84.42 percent same time last year. Allowance for credit losses or banks’ provisioning for loan losses were also up by 3.42 percent to P424.643 billion from P410.605 billion.
The BSP reported that past due ratio which is the delinquency rate, fell to 4.04 percent in September versus 5.21 percent same period in 2021.
Total past due loans reached P488.714 billion which was 14.50 percent lower from P571.597 billion in 2021. 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.
Based on the latest Banking Sector Outlook Survey (BSOS) 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.
Meantime, 42.7 percent of surveyed banks project an NPL coverage ratio in the range of 51 percent to more than 100 percent in the next two years.
“Amid the long tail of the Covid-19 pandemic, the Philippine banking system is projected to withstand the legacy risks and challenges of the pandemic within the next two years on account of its stable and sound capital and liquidity buffers, ample loan loss reserves, good earnings performance and prudent risk governance,” said the BSP.