Big banks keep level of bad loans low

Bad loans held by major banks remained low at the end of August as the industry maintained prudent lending standards despite strong demand from households and businesses benefiting from the country’s growing economy.

The Bangko Sentral ng Pilipinas (BSP) on Wednesday announced that nonperforming loans (NPL) held by universal and commercial banks eased further to 2.67 percent at the end of August.

This was slightly lower than the 2.68-percent NPL ratio recorded in July, and 3.05 percent in August of 2012.

NPLs are defined as loans whose payments are late for at least one month.

“The banks’ NPL ratio remained low as universal and commercial banks kept soured loans in check amid record-high lending,” the BSP said in a statement.

NPLs of universal and commercial banks, which make up around 90 percent of the total banking industry in terms of assets, have been below 3 percent since September of last year.

The BSP said that as the industry’s total loan portfolio continued to rise, banks were able to trim their bad loans.

Total NPLs held by banks stood at P101.93 billion in August, lower than the P104.17 billion in the same month last year.

The decline in NPLs was accompanied by a growth in the industry’s total loan portfolio (TLP), which stood at a record high of P3.818 trillion in August from P3.412 billion the same month last year.

Net NPLs, which are soured loans net of specific allowances for potential credit losses, were at 0.42 percent of the industry’s TLP, the BSP said.

Coverage for bad loans stood at 129.13 percent of total NPLs, slightly lower than 131.07 percent the month before but higher than the 124.21 percent in August of 2012.

The BSP said banks reported declines in bad loans across various sectors of the economy.

This was most pronounced in financial intermediation, real estate, manufacturing, and wholesale and retail trade.

These sectors comprised 62 percent of banks’ total loans.

“The latest NPL figures enabled banks to maintain high loan quality,” the BSP said.

“This is essential to keeping the viability of individual banks and to maintaining the stability of the domestic banking system,” the regulator added.