Regulators said the ability of the big banks to keep their non-performing loans within comfortable levels was one indication that the sector remained sound. They also said it proved that the banking crisis in the euro zone was not spilling over, at least for now, to the Philippines.
Data from the Bangko Sentral ng Pilipinas showed that the combined non-performing loans (NPL) of universal and commercial banks accounted for 2.18 percent of their total outstanding loans as of end-July.
This NPL ratio was lower than the 2.45 percent registered in July last year.
Since 2011, the average NPL ratio of the country’s big banks has been hovering in the 2-percent territory. BSP officials said that at this level, the bank’s exposure to bad debts has become even more manageable than that seen prior to the Asian financial crisis of the late 1990s.
On a month-on-month basis, the latest NPL ratio was higher than the all-time low of 2.06 percent recorded in June.
The NPL ratio in July came about as the combined bad debts of the universal and commercial banks amounted to P73.36 billion, and as their total outstanding loans reached P3.37 trillion.
The amount of bad debts was actually higher by 0.4 percent from the year-ago figure of P73.05 billion. But the NPL ratios still dropped because the total outstanding loans grew by a much faster pace of 13.1 percent from only P2.98 trillion in the same period last year.
Regulators said the decline in the exposure of universal and commercial banks to bad debts over the years may be traced to implementation of credit reforms since the crisis in the late 90s’. Since then, they said, bank regulations on lending have become more prudent. At the same time, banks also adopted their own reforms.
Some economists, however, said banks in the country may have become a little too cautious about lending as they intend to keep their exposure to bad debt within comfortable levels. They said that given the enormous liquidity of the banking sector, banks can actually lend more and help the economy grow further.
Banking industry members, said, however, that there is sufficient appetite to lend. They said they could lend more only if there were more demand for loans.
Regulators said there should be more investment activities in the country so that demand for loans will rise and so that the economy can fully maximize the benefits of growing resources of the banking sector.