PH banks’ soured loans seen settling at 5-7% of assets
Despite the devastating impact of the COVID-19 pandemic on the economy, Philippine banks’ nonperforming or soured loans (NPL) are expected to settle within 5 percent to 6 percent of total assets by end-December 2021 and projected to remain at single-digit levels in the next few years, according to the Bangko Sentral ng Pilipinas (BSP).
Also in November, total assets grew by 7 percent to P20.4 trillion, buoyed mainly by a 9-percent growth in deposits, which reached P15.8 trillion.
“This indicates the continued trust and confidence of the public in the banking system,” BSP Governor Benjamin Diokno said. “The strong performance of the banking system amid this crisis is due to its strong fundamentals supported by deep financial sector reforms.”
In 2022, Diokno said the NPL ratio was expected to rise to 8 percent. Still, he said that in the next several years, this would remain “well-below the double-digit NPL numbers during the 1997 Asian Financial Crisis.”
The BSP considers a loan nonperforming when there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, if any. Other loans are seen as nonperforming if any principal and/or interest are unpaid for more than 90 days from the due date.
The BSP chief said the full implementation of the Financial Institutions Strategic Transfer law, enacted in February 2021, was seen to help reinforce banks’ NPL management.
The law provides a framework on the full transfer of the bad loans and assets of banks to a special corporation. The banks are enabled to repurpose resources and improve liquidity in the financial system.
