Soured bank loans rose slightly as of end-Feb

Soured loans held by the country’s major banks rose slightly at the start of the year after reaching record lows in 2014, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Local banks exhibited their prudence despite the increase in non-performing loans (NPL) as cash provisions for potential losses stayed near record highs.

Loans that are unpaid at least 30 days after falling due are called NPL.

At the end of February, the gross NPL held by universal and commercial banks rose to 1.96 percent of the sector’s total loan portfolio, up from 1.82 percent last December.

December’s NPL ratio was the lowest since the late 1990s, showing the stark improvement in the banking sector’s asset quality since the Asian financial crisis.

Universal and commercial lenders make up 90 percent of the country’s banking sector.

Gross NPL at the end of the month reached P95.655 billion, up 1.5 percent over the same period last year.

The sector’s total loan portfolio rose at a faster pace of 14.7 percent to reach a total of P4.87 trillion at the end of February.

Major banks had more than enough cash set aside to cover for losses that may arise from NPL.

At the end of the month, the banks’ NPL coverage reached 140.46 percent of all bad loans, down slightly from 142.43 percent in end-December.

The growth of outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP, decelerated to 15.2 percent in February from 17.3 percent in January.

Similarly, bank lending inclusive of RRPs grew at a slower pace of 14.6 percent in February from 16.6 percent in the previous month.

Loans for production activities—which comprised more than 80 percent of banks’ aggregate loan portfolio—expanded, albeit at a slower rate of 14.5 percent in February from 16 percent in January, the BSP said.

While double-digit growth has continued in most major segments such as manufacturing, the pace of credit growth to production activities has moderated for some subsectors, particularly real estate, renting and business services.

Loans for household consumption expanded by 21.1 percent in February from 20.5 percent in January due to faster growth in credit cards, and auto, salary and personal loans.