Thrift banks’ bad loans on downtrend

Soured loans held by medium-sized lenders continued to fall as a proportion of the total in the third quarter of this year, reflecting the healthy but prudent expansion of their portfolios.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed bad loans were also down across various sectors, including real estate, consumers, financial intermediation, and wholesale and retail trade, among others.

“The industry’s nonperforming loan (NPL) ratio sustained a quarter-on-quarter downtrend that began in June 2013,” the BSP said in a statement.

The thrift banking industry’s gross NPLs accounted for 4.52 percent of its total loan portfolio (TLP) at end-September 2014.

Gross NPL ratios were 4.83 percent and 5.89 percent at end-June 2014 and at end-September 2013, respectively.

Thrift banks’ gross NPL ratio remained low due to a rise in lending and a decline in gross bad loans, the BSP said.

At end-September 2014, the industry’s loan portfolio grew to P575.78 billion from P562.85 billion a quarter earlier.

Thrift banks’ gross NPLs, meanwhile, dropped to P26.05 billion in September last year from P27.16 billion in the same period.

Aside from keeping NPL levels in check, the industry also maintained substantial reserves for potential credit losses.

At the end of the third quarter of 2014, the industry’s loan loss reserves represented 74.38 percent of its gross NPLs, higher than the 70.27 percent posted at end-June last year.

Moreover, thrift banks’ NPL levels also remained manageable across economic sectors as gleaned from real estate, renting and business activities; loans to individuals for consumption purposes; financial intermediation; wholesale and retail trade; agriculture, hunting, forestry and fishing; other community, social and personal service activities; and manufacturing.

The decline in NPL levels indicate an improvement in the thrift banks’ loan quality. “As bank supervisor, the BSP monitors banks’ loan quality as part of its broader effort to promote sound risk management among banks which is essential to maintaining the stability of the financial system,” the regulator said.