Bad weather hikes bad loans of rural banks

MANILA, Philippines – Bad weather increased the bad loans of rural and cooperative banks in 2012. 

Typhoons Gener and Helen (international codename: Saola and  Kai-tak) and monsoon rain that inundated parts of the country in July and August affected the ability of clients of rural and cooperative banks to service their debts, according to the Bangko Sentral ng Pilipinas (BSP).

Non-performing loans (NPL) of these banks increased to 11.57% at end-2012 from 10.14% at end-2011, according to the data that the BSP released on Tuesday, June 18. 

This is equivalent to P14.75 billion NPLs out of the P127.47 billion total loan portfolio of the rural banks in 2012.

Loans become non-performing if they are unpaid within or more than 90 days after they are due.

Despite the increase in NPL ratio, the BSP highlighted the 11.38 percentage points increase in the banks’ loan loss reserves for NPLs as an indication to “heightened prudence (of the banks) against credit losses.”

Loan loss reserves, which reflect the amount of funds the banks set aside as buffer in case the NPLs eventually don’t get paid, rose to 61.74% at end-2012 from 50.36% a year ago.

Rural banks posted a 10.65% NPL ratio at end-2012, higher than the 10.32% in 2011. Loan loss reserves  increased to 59.47% from 47.94%.

Cooperative banks, on the other hand, saw their NPL ratio doubling to 19.84% from 8.58%. However, loan loss reserves slipped to 72.7% from 75.3%. 

“The Bangko Sentral ng Pilipinas continues to proactively monitor the NPLs of the various segments of the banking sector to ensure that credit underwriting standards remain high in a low interest rate environment,” the bank said in a statement. – Rappler.com