Banks’ soured loans inch up, but level still comfortable

Soured loans held by the country’s major banks slightly increased in May from April levels, but stayed within a healthy range as industry players maintained strict credit standards despite the sector’s expansion.

The Bangko Sentral ng Pilipinas (BSP) said banks maintained high credit standards, despite the temptation to take more risks by extending loans to sub-standard borrowers to offset low interest rates that weighed on profits.

“Low and generally declining NPL ratios indicate that universal and commercial banks are taking proactive steps to ensure that their respective credit portfolios adhere to high standards,” the Bangko Sentral ng Pilipinas (BSP) said Thursday.

In a statement, the regulator said gross NPLs increased to 2.75 percent of the industry’s total loans in May, up from 2.74 percent in April.

The country’s major banks were required to report gross NPLs starting last January, as part of a recent change in disclosure rules implemented by the BSP. Gross NPLs refer to actual NPLs, without the usual adjustments for write-offs.

The BSP said the new reporting standard gives a “fuller picture” of the industry’s stock of soured loans and the “full extend of allowances” for probable losses. Under the previous disclosure rules, NPLs were reported net of loans considered written off, but fully provisioned for.

As of May, total loans reached P3.69 trillion, with gross NPLs amounting to just P101.36 billion. This compares to total loans of P3.65 trillion and gross NPLs of P100.61 billion at the end of 2012.

“The trend becomes more impressive with the fact that the total loan portfolio continues to rise,” the BSP said.

In the meantime, net NPLs also inched up to 0.44 percent of total loans—the same level as the month before.

Banks’ buffers for possible losses stood at 128.50 percent as of May, down slightly from 128.63 percent in April.