Banks’ NPL ratio improves to 3.47% in September


Domestic banks’ gross non-performing loans (NPL) or its soured loans ratio dropped to a five-month low of 3.47 percent in September, based on the latest data from the Bangko Sentral ng Pilipinas (BSP).

The gross NPL ratio is lower than August’s 3.59 percent which was the highest so far for 2024. Meanwhile, the September bad loans ratio was higher compared to same period last year of 3.40 percent.

The NPL ratio is the percentage of NPLs to total loans, gross of allowance for credit losses but inclusive of interbank loans. The September NPL ratio is the lowest in five months after April's 3.45 percent.

During the period, the total loan portfolio of the banking sector rose 14 percent to P14.903 trillion compared to same time last year of P13.064 trillion.

Out of the loans, NPLs which are loan accounts whose principal or interest is unpaid for 30 days or more after they have become past due, amounted to P517.452 billion, up 16.45 percent from P444.332 billion same period last year.

NPLs are loans, investments, receivables, or any financial asset considered impaired under existing accounting standards. These are also classified as doubtful or loss, in litigation, or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, if any, said the BSP.

In September, data showed banks’ past due ratio or the delinquency rate, dropped to 4.25 percent from August’s 4.42 percent but it was higher compared to same time last year of 4.21 percent.

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. The total past due loans reached P632.868 billion in September versus P549.932 billion in 2023.

Loans and other credit accommodations with unpaid principal and interest are provided with allowance for credit losses under BSP rules. This will be based on the number of days of missed payments, which was anywhere from 31 to 90 days, up to 181 days and over.

Loan loss reserves or banks’ NPL coverage ratio dipped slightly to 93.31 percent in September from 94.11 percent in August. Last year, loan loss reserves were higher at 103.71 percent.

Loan loss reserves to NPL ratio is the proportion of loan provisions against probable losses to the total NPLs. To cover for these potential losses, banks have set aside for loan loss provisioning an amount of P482.837 billion during the period. This was 4.77 percent higher than same time last year of P460.838 billion.

Meanwhile, the industry’s gross restructured loans which are relief measures given to problematic borrowers, totaled P294.528 billion, down 4.14 percent compared to same time last year of P307.235 billion. Restructured loans are loans and other credit accommodations that a bank – upon agreement with the borrower – has modified the contractual terms and conditions and revised the schedule of payments to lessen the financial difficulty of the borrower.

The ratio of restructured loans to total gross loan portfolio stood at 1.98 percent in September, lower than 2.05 percent in August and from same time last year of 2.35 percent.

In a report earlier this year, the BSP said the banking system has been improving its assets and deposits’ base. It further noted that despite increases in bad loans, banks’ loan exposures continue to be adequately covered with loan loss reserves.

BSP numbers showed that from 2015 until 2019 or the years before the Covid crisis, the NPL ratio ranged between 1.7 percent and 2.5 percent. When the pandemic hit in March 2020, the NPL ratio increased and ranged from 2.2 percent to a high of 4.5 percent between 2020 and 2022.