Banks’ bad loans slightly down as of end-October

The share of universal and commercial banks’ bad loans to the total portfolio slightly declined to 1.77 percent as of end-October last year, keeping the non-performing loan (NPL) ratio below 2 percent for 12 straight months.

In a statement, the Bangko Sentral ng Pilipinas (BSP) attributed the improved end-October NPL ratio to a month-on-month drop in gross NPLs while the total loan portfolio (TLP) widened. The NPL ratio was at a higher 1.82 percent at end-September.

In October, universal and commercial banks’ gross NPLs slid to P94.52 billion from P95.24 billion the previous month. Lending, meanwhile, increased to P5.35 trillion from P5.24 trillion a month ago.

“Aside from keeping the NPL ratio low, universal and commercial banks continued to allocate substantial reserves as buffer for potential credit losses. At end-October last year, the industry provisioned for 140.97 percent of its gross NPLs,” the BSP said.

The NPL coverage ratio was lower at 139.74 percent at end-September.

“The universal and commercial bank industry’s gross NPLs also remained manageable across economic sectors as seen in financial and insurance activities: real estate, manufacturing, wholesale and retail trade, and electricity, gas, steam and air-conditioning supply, which represented 69.3 percent of the banks’ TLP in October 2015,” the BSP said.