Banks' bad loans-to-total loans ratio seen at 4%
Philippine Daily Inquirer
First Posted 17:42:00 06/29/2008
Filed Under: Banking, Economic Indicators
MANILA, Philippines--The Bangko Sentral ng Pilipinas (the Philippine central bank) expects the commercial banking sector's stock of bad loans to end this year at the pre-Asian currency crisis level of 4 percent of its total loan portfolio.
BSP Deputy Governor for bank supervision Nestor Espenilla Jr. said on Friday the projected improvement in the non-performing loan (NPL) ratio would be boosted by the expected 10-percent growth in the banking system's lending this year.
"There are areas where credit is growing faster--like consumer and infrastructure," Espenilla said.
With shrinking gains from foreign exchange and bond trading this year, banks are prompted to expand their loan books to generate more interest earnings.
Bad loans refer to loan accounts that remained unpaid 90 days after falling due. The BSP said the commercial banking sector's NPL ratio improved by 0.14 percentage point to 4.54 percent in March from 4.68 percent in February. In March last year, the bad loan ratio was 5.28 percent of the loan portfolio.
Total bad loans dropped by 0.93 percent to P96.42 billion in March from month-ago level. However, the banks' total loan portfolio expanded by 2 percent to P2.1 trillion from month-ago figure.
The commercial banking system's stock of bad loans-to-total loans ratio peaked at more than 20 percent in 2002 as several corporate borrowers defaulted on their debts and banks turned cautious in view of the sharp fall of the peso and rise in interest rates.
The cleanup of the banks' bad assets that had piled up since the Asian crisis was aided by the Special Purpose Vehicle Law, which waived some of the taxes and reduced fees collected in the sale or transfer of assets. Some of the soured loans were taken out of the banks' NPL books through restructuring.
Based on the latest BSP report, the ratio of restructured loans to total loans declined to 2.91 percent in March from 3.03 percent in February, driven by the 1.77-percent cut in gross restructured loans to P62.08 billion.
Doris C. Dumlao
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