Banks’ NPL ratio rises in April to 3.45%

Banks’ gross non-performing loans (NPL) or soured loans ratio went up to 3.45 percent in April, higher than the previous month’s 3.39 percent and same period last year of 3.41 percent, based on Bangko Sentral ng Pilipinas (BSP) data.

This was the highest gross NPL ratio so far for this year, after 3.44 percent in both January and February.

The NPL ratio is the percentage of NPLs to total loans, gross of allowance for credit losses but inclusive of interbank loans. NPLs refer to loan accounts whose principal or interest is unpaid for 30 days or more after they have become past due.

In April, total NPL rose by 12.33 percent year-on-year to P480.648 billion from P427.881 billion.  

During the period, the total loan portfolio increased by 10.98 percent year-on-year to P13.940 trillion versus P12.560 trillion in 2023.

Meanwhile, banks’ past due ratio or the delinquency rate went up to 4.43 percent from 4.30 percent in March and from 4.13 percent in the same period last year. 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 grew by 19.18 percent year-on-year to P618.035 billion in April from P518.548 billion same period in 2023.

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

Banks’ NPL coverage ratio which are loan loss reserves, stood at 98.07 percent in April, lower than 100.66 percent in March, and 103.30 percent in April 2023.

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 set aside P471.352 billion as loan loss provisioning, up by 6.64 percent from P441.983 billion last year.

Banks’ gross restructured loans which are relief measures given to problematic borrowers totaled P290.373 billion during the period. This was lower by 10.48 percent compared to P324.382 billion same time in 2023.

Restructured loans to total gross loan portfolio was at 2.08 percent, lower than 2.15 percent in March and 2.58 in April 2023. These 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.

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.