Soured loans of thrift and rural banks fall in H1

MANILA, Philippines – Soured loans of thrift, rural, and cooperative banks continued to decline in the first half of 2015, while the reserves these banks have set aside to cover losses have increased.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the ratio between the gross non-performing loans (NPLs) of thrift banks and their total loan portfolio stood at 4.69% at end-June this year, compared to 4.83% the same period last year.

The BSP defines NPL as past due loans where the principal or interest is unpaid for 30 days or more past the due date.

The total loan portfolio of thrift banks increased by 13.4% to P638.15 billion ($13.49 billion) in end-June this year, from P562.85 billion ($11.90 billion) in end-June last year.

Gross NPLs grew at a slower pace of 10.3% to P29.95 billion ($633.3 million), from P27.16 billion ($574.3 million) last year.

The BSP pointed out that loan loss reserves, including specific allowance for credit losses and general loan loss provision, rose by 12.4% to P21.46 billion ($453.8 million), from P19.09 billion ($403.7 million), the BSP said.

This means a higher NPL coverage ratio of 71.63% in end-June this year from 70.27% in end-June last year.

“The thrift bank industry also continued to set aside substantial reserves as buffer for potential credit losses,” the BSP said.

It added that the gross NPLs of thrift banks also remained manageable across economic sectors. This is seen in real estate activities and loans to individuals for consumption which accounted for 64.1% of the banks’ portfolio.

The BSP said soured loans of rural and cooperative banks fell to 11.9 % in end-June this year from 13.45% in the same period last year.

Loans of rural and cooperative banks declined by 9.8% to P119.78 billion ($2.533 billion), from P132.89 billion ($2.810 billion). Gross NPLs plunged 20.2% to P14.25 billion ($301.3 million)  from P17.87 billion ($377.9 million).

The industry’s loan loss reserves also fell 13% to P8.91 billion ($188.4 million), from P10.24 billion ($216.5 million).

This translated to a higher NPL coverage ratio of 62.51% in end-June this year from 57.31% the same period last year.

The largest recipients of loans from rural and cooperative banks were agriculture, forestry and fishing; wholesale and retail trade; loans to individuals for consumption purposes; and real estate activities.

The central bank said it would continue to look into the loan quality of banks as part of its efforts to promote sound credit underwriting standards and financial stability. – Rappler.com

$1 = P47.29

Non-performing loans file  image via Shutterstock