Thrift banks’’ bad loans down

Bad loans held by mid-tier banks declined slightly relative to the size of the industry’s total portfolio amid conservative lending by banks, which have so far resisted the temptation to ease lending standards in pursuit of higher margins.
Data released by the central bank showed thrift banks’ nonperforming loans (NPL), in absolute terms, remained steady at the end of June over the same period last year.
Thrift banks’ total loan portfolio rose by 20 percent, however, in the same period.
“The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management systems and to maintain high loan quality,” the Bangko Sentral ng Pilipinas (BSP) said.
At the end of June, thrift banks’ NPLs fell to 4.82 percent of their total loans. This was an improvement from 4.94 percent in March and 5.94 percent in June of 2013.
Bad loans held by thrift banks were still higher than those of universal and commercial banks, which make up about 90 percent of the financial system. At the end of June, NPLs of major banks stood at 2.10 percent.
NPLs are loans that have fallen due for 30 days or more. Measuring NPLs helps gauge the credit standards of banks to ensure that only borrowers that are capable of meeting their obligations are given access to financing.
“These are essential to sustaining the viability of individual banks and to maintaining the overall stability of the domestic financial system,” the BSP said.
Banks’ NPLs decreased by 2.44 percent to P27.16 billion from P27.84 billion in the same period last year. The drop in NPLs was also accompanied by rising reserves for potential losses.
At the end of June, loan loss reserves rose to the equivalent of 70.27 percent of NPLs from 69.37 percent in March.
NPLs also remained low across economic sectors, as seen in real estate, renting and business activities, loans to individuals, financial intermediation, wholesale and retail trade, and agriculture.
At the end of June, thrift banks’ assets totaled P819.10 billion, or less than a tenth of the entire banking industry’s P10.27 trillion. Paolo G. Montecillo

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