Bad loans by Philippine banks low in March

MANILA, Philippines – Bad loans held by the Philippines’ major banks were low in March, signalling that the country’s financial climate remains positive and stable, mainly because of their sound credit risk management and lending policies.

Latest data released by the Bangko Sentral ng Pilipinas (BSP) showed non-performing loan (NPL) ratio of universal and commercial banks in March slid to 1.95% from 2.16% in the same month a year ago.

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

This March NPL ratio, according to the BSP, remained virtually unchanged from the 1.96% in February and 1.98% in January this year.

The local banks decreased their reserves for potential credit losses during the month because the NPL ratio remained low.

“Said monthly banking indicator has been below 2% since November last year,” the BSP statement read.

Bad loans by absolute amount increased to P97.36 billion ($2.16 billion) in March from P93.53 billion ($2.07 billion) a year earlier.

NPL drops despite increased lending

In a separate statement, the Philippine central bank said bad loans held by the country’s thrift banks decreased in the fourth quarter of 2014 despite increased lending.

Data from the BSP showed the gross NPL of thrift banks at P25.17 billion ($558.23 million) at end-December, accounting for 4.38% of the banks’ total loan portfolio during the period. This is much higher than the NPL ratio of 5.46% in the same period a year ago.

Total loan portfolio of thrift banks went up to P574.63 billion ($12.74 billion) at end-December from P508.2 billion ($11.27 billion) in the same period of 2013.

Despite a declining bad loans ratio, thrift banks still increased their loan-loss reserves to 76.98% as of end-December from 72.51% a year earlier.

The latest NPL data mirror efforts by thrift banks to adhere to “sound credit risk management system and to maintain high loan quality,” it said.

“The Bangko Sentral ng Pilipinas keenly monitors these indicators as part of its efforts to foster the stability of the financial system,” the BSP added. – Rappler.com

$1 = P45.09