Banks’ bad loans continue to decline

BSP Governor Amando M. Tetangco Jr.: Sound lending practices INQUIRER FILE PHOTO

MANILA, Philippines—Soured loans held by the country’s major banks remained at record-low levels as of the end of May, as low interest rates and improved economic conditions kept loan defaults at a minimum.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the nonperforming loans (NPL) as a ratio to total loans extended by universal and commercial banks stood at 1.87 percent at the end of May. This is the same NPL ratio recorded as of the end of 2012.

Tetangco attributed the low NPL ratio to prudential rules enforced by the BSP as the industry’s regulator, as well as the sound lending practices of local banks.

He said the banking industry had shown continuous improvement in bringing down bad loan ratios, which reached double-digit rates during the 1997 Asian financial crisis. The latest NPL ratio, however, “is even better than pre-Asian crisis levels,” Tetangco said.

Total loans by universal and commercial banks net of reverse repurchase placements with the BSP, rose by 13 percent year-on-year in May, accelerating from the 12-percent growth the month before.