Major banks’ soured loans decline anew

Major banks further trimmed their stock of bad loans at the end of the third quarter despite lending aggressively since the start of the year, documents from the central bank showed.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said nonperforming loans (NPL) of universal and commercial banks declined to just 2.6 percent of their total portfolio. This was lower than the 2.67 percent NPL ratio recorded the month before.

“The gross NPL ratio stayed low amid a year-on-year decline in soured loans and the continued rise in lending,” the BSP said.

Data released by the central bank last week showed the total loan portfolio of major banks grew by 16.2 percent in September—the fastest expansion so far this year.

A receivable is classified as an NPL once payments are late for at least 30 days.

In absolute terms, soured loans declined to P102.09 billion in September. This was up slightly up from P101.93 billion in August but lower than the P103.42 billion a year ago.

Apart from the improvement in the industry’s loan quality, the BSP also noted that banks were able to maintain a high level of reserves for possible losses in case of defaults.

Reserves for potential credit losses as universal and commercial banks provisioned for 128.8 percent of their gross NPLs in September.

This was slightly lower than the 129.13 percent recorded the month before. The industry’s loan-loss reserve ratio was better than the 124.35 percent last year.

Major banks’ NPL levels also continued to remain low across economic sectors, the BSP said. This was seen in the financial intermediation, real estate, manufacturing and wholesale and retail trade sectors, which together accounted for 62.8 percent of the banks’ total loans in September.

“Low NPL ratios and robust loan-loss provisioning indicate prudent management of credit risks,” the BSP said. The BSP monitors these indicators as part of its objective to maintain the stability of individual banks and of the domestic financial system.