Banks’ bad loans inched up in July
MANILA, Philippines-Although the level of bad loans held by the country’s major banks inched up in July, from record lows in June, the figure still came out lower year on year, the Bangko Sentral ng Pilipinas (BSP) reported.
The central bank on Thursday said in a statement that, despite the slight increase in nonperforming loans (NPL), banks continued to have substantial buffers that were more than enough to cover possible losses.
“Despite the uptrend in gross NPLs, the NPL ratio of universal and commercial banks remained stable,” the regulator said.
Universal and commercial banks make up about 90 percent of the local banking sector in terms of assets and resources.
NPLs are loans that were unpaid for at least 30 days. The central bank keeps a watch on bad loans to ensure lenders are not taking excessive risks that could weigh on their balance sheets.
NPLs comprised 2.11 percent of banks’ total loan portfolio (TLP) of P4.51 trillion in July. The ratio is “practically the same” as the 2.10 percent posted last June, the BSP said.
Article continues after this advertisementThe regulator noted that banks’ NPLs rose anew after easing to P94.8 billion last June, from P96.07 billion a month earlier.
Article continues after this advertisementThe absolute amount of NPLs reached P95.19 billion—lower than the P100.8 billion in July of 2013. The rise in the banking industry’s bad loans has been accompanied by the faster growth of total loans.
Outstanding loans by universal and commercial banks were up by a fifth at the end of July, BSP data showed.
Banks’ reserves for potential credit losses continued to exceed their NPLs. Last July, the industry’s loan loss reserves represented 140 percent of its NPLs. This indicates the industry’s conservative stance in setting buffers against credit risks.
NPL levels also remained low across economic sectors. This was seen in financial intermediation; real estate, renting and business activities; manufacturing; wholesale and retail trade; and electricity, gas and water supply; which together accounted for 71 percent of the industry’s TLP during the period.
