Banks’ bad loans hit record low, says BSP

Major local banks kept soured loans at record lows in April despite the sustained growth for financing fueled by the country’s growing economy, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

This indicated that banks chose to defend the health of their balance sheets instead of taking excessive risks, despite high demand for loans from businesses and households.

“Keeping non-performing loan (NPL) levels manageable and loan loss provisioning are essential to managing credit risks,” the BSP said in a statement on Tuesday.

At the end of April, universal and commercial banks’ NPLs stayed low at 2.16 percent of their total loan portfolios, the BSP said.

This was the same level recorded at the end of March, and an improvement from the 2.74 percent in April of 2013.

The country’s universal and commercial banks make up about 90 percent of the local banking sector.

NPLs are loans that have not been paid 30 days past due, and are hence at risk of being written off.

Outstanding loans of major banks rose by 20.9 percent in April, accelerating from the previous month’s 20 percent.

This came amid the availability of cheap cash in the economy following the exit of individual investments from the central bank’s special deposit accounts last year.

Despite the growth, a BSP survey showed that major banks maintained credit standards for businesses, keeping collateral requirements and loan maturity durations the same.

For households, credit standards were tightened as banks became more risk averse.

The BSP said year-on-year, gross NPLs of banks declined by P6.19 billion to P94.42 billion. Paolo G. Montecillo