Banks’ nonperforming loans down in June

Bad loans held by major banks decreased in June despite the continued rise in lending to support the country’s growing economy, data released this week showed.

In a statement, the Bangko Sentral ng Pilipinas said nonperforming loans (NPL) held by universal and commercial banks declined at the end of June from the May level.

“The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management systems and maintain high loan quality,” the BSP said, commenting on the data.

The NPLs-to-total loans ratio at the end of June declined to 2.68 percent from 2.75 percent in May and 3.01 percent in June 2012.

The BSP said local banks were able to resist the temptation of relaxing their lending standards and lend excessively to the public to increase profits. The BSP said bank lending standards remained high despite the availability of ample liquidity in the system.

“These are essential to sustaining the viability of banks and to maintaining the overall stability of the domestic financial system,” the BSP said.

“This enabled the banks to keep their gross NPL ratio at or below 3 percent for the 10th straight month,” the BSP said Wednesday.

The decline in NPLs as a percentage of total loans came amid the year-on-year drop in gross NPLs to P100.91 billion from P102.1 billion. Banks’ total loans were up to a record high of P3.76 trillion in June from P3.39 trillion in the same month in 2012.

Apart from keeping NPLs at manageable levels, the BSP said local banks also increased their reserves for potential write-offs. In June, banks’ total loan loss reserves reached P131.29 billion, or 130 percent of total NPLs.

Universal and commercial banks also saw soured loans decrease across all sectors of the economy, the BSP said. This was evident in the financial intermediation, real estate, manufacturing, and wholesale and retail trade sectors. These collectively made up about 63 percent of total loans extended by major banks.