THE Bangko Sentral ng Pilipinas said nonperforming loans of commercial and universal banks eased further in September, bringing down the NPL ratio to its lowest level since it peaked at 18.8 percent in October 2001.
The BSP yesterday reported that NPL ratio, which is the proportion of soured loans to a bank’s total loan portfolio, declined to 3.25 percent in September from 3.5 percent in August, and 4.03 percent in September last year.
According to a central bank report, combined NPLs of commercial and universal banks amounted to P81.42 billion as of end-September, down from P83.84 billion posted the previous month and from P93.83 billion recorded in September last year.
The latest amount of outstanding loans of commercial and universal banks stood at P2.5 trillion—up from P2.4 trillion as of August, and P2.3 trillion as of September last year.
The NPL ratio peaked at 18.8 percent in October 2001 due to the spillover effects of the Asian financial crisis in the late 1990s.
Since that time, banks in the Philippines and in neighboring countries have adopted stricter lending standards to improve their financial performance, central bank officials said.
Bank regulators said the latest NPL ratio reflected prudent lending standards observed by commercial and universal banks.
The decline in NPL ratio—an indication of the level of exposure of banks to bad debts—took place at a time when most banks decided to increase lending.
The central bank said appropriate lending standards of banks were a reason why financial institutions remained healthy amid a global financial crisis.
While the finance institutions of most industrialized nations were hit by liquidity problems, Philippine banks remained adequately capitalized and highly liquid, the BSP said.
Excluding interbank loans, the nonperforming loans ratio of commercial and universal banks stood at 3.74 percent, better than the 3.99 percent in August and 4.55 percent in September last year.
The NPL ratio net of interbank loans was a result of the P81.42 billion in soured loans and P2.18 trillion in outstanding loans, excluding those extended to banks.
The BSP also reported that the ratio of the banks’ real and other properties acquired (ROPA) to gross assets likewise dropped, as banks were able to dispose more of their nonperforming assets. The ratio stood at 2.59 percent as of end-September, down from 2.66 percent in August and 2.96 percent in September last year.
ROPA stood at P138.39 billion, while gross assets amounted to P5.31 billion.
“The industry provided adequate provisioning against potential credit losses,” the BSP said in a statement.
The central bank also reported that the reserves of commercial and universal banks allotted for potential credit losses increased to P90.59 billion from P88.3 billion in August and P89 billion in September last year.
The amount of reserves led to an NPL coverage ratio of 3.74 percent. NPL coverage ratio is the proportion of loan loss reserves to the amount of nonperforming loans.
