Rural, cooperative banks’ bad loans up in Q1

MANILA, Philippines - Soured loans of rural and cooperative banks inched up in the first quarter after sliding to its lowest level in two years, prompting banks to jack up their loan loss reserves, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The central bank said the gross non-performing loans (NPLs) of rural and cooperative banks inched up to 12.04 percent of the banks’ total loan portfolio as of end March from 11.85 percent in end 2014.

The NPL ratio booked in end December was the lowest level recorded by rural and cooperative banks since September 2012.

Data from the BSP showed soured loans of rural and cooperative banks inched up 2.2 percent to P16.76 billion in end March from P16.4 billion in end December.

On the other hand, the total loan portfolio of rural and cooperative banks went up 0.51 percent to P139.14 billion from P138.44 billion.

“The rise in the NPL ratio was because gross NPLs grew 2.17 percent while total loan portfolio increased by only 0.51 percent,” the BSP said.

The central bank said major recipients of loans from rural and cooperative banks include agriculture, forestry and fishing, wholesale and retail trade, loans to individuals for consumption purposes, and real estate activities.

To mitigate credit risks, the banks also set aside higher loan loss reserves amounting to P9.65 billion or 57.56 percent of their gross NPLs at end March from P9.56 billion or 58.3 percent of their gross NPLs at end December.

In line with its financial stability agenda, the BSP said it would continue to monitor the loan quality of banks as part its broader efforts to promote sound credit risk management among these lenders.