Banks' bad loans fall further at end-June
Reuters
First Posted 17:25:00 09/19/2008
MANILA, Philippines -- Commercial banks' non-performing loans (NPLs) in June slipped for a fourth month in a row to 3.99 percent of total loans, the lowest since the 1997/98 Asian financial crisis, the central bank said on Friday.
The industry's expanded loan portfolio, up 2.3 percent at the end of June from May, and a 2.0 percent decline in non-performing loans in the same period, helped to improve commercial banks' credit profile.
"What makes the lower NPL ratio quite meaningful is the fact that it was not limited to a reduction in accounts experiencing payment difficulties," the central bank said in a statement.
"Moving forward, this expansion in the loan portfolio is just as critical since it makes credit available for productive economic endeavors," it said.
Non-performing assets, which are bad loans and real estate foreclosed by banks, made up 5.0 percent of banks' gross assets at the end of June, down from 5.2 percent the previous month and 5.7 percent a year earlier.
Loan loss reserves amounted to P90.8 billion ($2 billion) at the end of June, resulting in an NPL coverage ratio of 96.6 percent, higher than the nearly 95 percent coverage in May and 84 percent a year earlier.
Banks' bad loan ratio improved significantly after the government passed a law that granted incentives such as tax perks to buyers of banks' soured assets.
Bad loans peaked at 18.8 percent in October 2001, in the aftermath of the regional financial crisis, following defaults by corporate borrowers.
($1 = P46.55)
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