Banks’ non-performing loans up 6.3% as of end-August

Bangko Sentral ng Pilipinas (BSP). RYAN LEAGOGO/INQUIRER.net FILE PHOTO

MANILA, Philippines–Soured loans held by the country’s major banks rose at the end of August, outpacing the growth in the amount of cash lent by banks, regulators reported Tuesday.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said universal and commercial banks’ non-performing loans (NPL) rose by 6.3 percent to P101.20 billion in August over the July level. NPLs are loans that borrowers failed to pay at least a month after their due date.

Growth in total loans was slower at 1.66 percent in the same period. Universal and commercial banks account for about 90 percent of the cash and financing held by the Philippine financial sector.

On a year on year basis, banks’ total loans were up 20.2 percent at the end of August, while bad loans were flat.

Monitoring of banks’ asset quality is vital to the BSP’s job to ensure the stability of the financial system. The regulator also wants to make sure that banks don’t take excessive risks by lending to borrowers that can’t afford to make payments.

“This is vital to maintaining the stability of individual banks and of the financial system,” the BSP said in a statement.

At the end of August, the level of non-performing loans relative to the total portfolio rose to 2.21 percent from 2.11 percent the month before. The level of bad loans was still lover than 2.67 percent recorded at the end of August last year.

Loan loss reserves remained more than enough to cover for all NPLs, the BSP said.

Moreover, the banks’ loan loss reserves continued to surpass their NPLs. In August, the sector’s reserves for potential credit losses represented 134 percent of their NPLs. The ratio, however, decreased from the 140 percent posted in July.

Across economic sectors, NPL levels remained low as seen in financial intermediation; real estate, renting and business activities; manufacturing; wholesale and retail trade; and electricity, gas and water supply. These sectors accounted for 71.4 percent of the industry’s total loans during the period.

Originally posted: 3:52 PM | Tuesday, November 18th, 2014

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