PH banks’ bad loans down

MANILA, Philippines—Major local banks continued to demonstrate their strength in the first quarter of the year, bringing down soured loans even as lending rose by a fifth.

The Bangko Sentral ng Pilipinas (BSP) on Wednesday said the asset quality of the country’s 36 universal and commercial banks improved in March, despite the availability of cheap funds and the temptation to take more risks to boost profits.

The sector’s non-performing loans (NPL) went down to 2.16 percent of total loan portfolio (TLP) at the end of the first quarter.

This was an improvement from 2.22 percent in February, the BSP said.

In a previous statement, the BSP said outstanding loans of universal and commercial banks rose by 20 percent at the end of March, with the bulk going to productive sectors of the economy such as real estate, manufacturing and financial intermediation.

Universal and commercial lenders make up about 90 percent of the banking sector in terms of assets and resources.

Aside from keeping NPL levels low, the banks also continued to set aside robust provisioning for non-performing loans.

In March, major banks’ loan loss reserves stood at 141.22 percent of their NPL, up from the 128.31 percent posted a year earlier.

“Setting aside reserves for potential losses is a prudential measure for mitigating credit risk,” the BSP said.

NPL across economic sectors also remained low.

This was evident in loans to individuals for consumption purposes; real estate activities; financial intermediation; manufacturing; wholesale and retail trade; and electricity, gas and water supply.

The decline in NPL, which are loans that have remained unpaid 30 days after falling due, comes amid record liquidity growth rates in the period.

In January, liquidity growth reached a record-high 37.3 percent, reflecting cash withdrawn by banks from the BSP’s special deposit accounts (SDA).

To curb liquidity and lending growth, the BSP has raised banks’ reserve requirements by a total of 2 percentage points, which central bank estimates show would mop up P120 billion in cash from the economy.