Rural, thrift banks report decline in level of bad loans

Bad loans held by countryside banks went down but remained elevated at the end of September last year, reflecting continuing efforts by small lenders to improve their books.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the combined gross non-performing loans (NPLs) of rural and cooperative banks represented 12.24 percent of the banks’ total loan portfolio (TLP) of P134.61 billion as of the end of September last year.

“The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management systems and to maintain high loan quality,” the BSP said in a statement.

“These are essential to sustaining the viability of individual banks and to maintaining the overall stability of the domestic financial system,” it added.

The third quarter figure improved from the 13.45 percent gross NPL ratio registered a quarter earlier as the amount of NPLs carried by small banks decreased amid a rise in their loan portfolio.

Rural and thrift banks’ loan portfolio increased by 1.3 percent from the P132.89 billion posted in June 2014.

NPLs are loans that have remained past due for at least 30 days.

The total loan portfolio of this sector represented 2.49 percent of the banking system’s loan portfolio of P5.42 trillion in September last year.

In the meantime, the NPLs of the rural and thrift banking sector accounted for 0.30 percent of the banking industry’s total loan portfolio during the period.

The top borrowers of rural, thrift and cooperative banks across economic sectors were agriculture, hunting, forestry and fishing; wholesale and retail trade; loans to individuals for consumption purposes; and real estate, renting and business activities.

Aside from keeping the NPL ratio low, these countryside banks also set aside loan loss reserves equivalent to 57.58 percent of their gross NPLs in September. The figure is slightly higher than the 57.31 percent recorded a quarter earlier. Paolo G. Montecillo