Banks’ NPLs start creeping up anew

With the continuing fall of the peso and the high interest rates, the non-performing loans (NPLs) of banks are expected to deteriorate anew.

In fact, the slide appears to have started based on the NPL levels of banks in August.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the NPL ratio of commercial banks had increased to 15.31 percent as of Aug. 31, from 15.26 percent in July.

In terms of absolute amounts, the combined NPLs of banks as of Aug. 31 reached P237.8 billion while the total loan portfolio was recorded at P1.553 trillion.

The BSP had hoped earlier this year that the banks’ NPLs would stabilize. But with the economy reeling under the weight of a shrinking peso and high interest rates the banks’ NPL ratio is expected to deteriorate anew as borrowers may again have difficulty servicing their loans.

According to the BSP, the banking industry’s loan loss reserves as of August stood at P104.7 billion, up by three percent from July’s P101.7 billion. This represents a coverage ratio (loan loss reserves divided by NPLs) of 44 percent compared to 43.7 percent in July.

The BSP said gross restructured loans, which rose from P81.7 billion a month ago to P85 billion, represented 5.5 percent of total loan portfolio up from 5.4 percent in July.

Net holdings of real and other properties owned or acquired (ROPOA) inched up by 0.2 percent to P114 billion from July’s P113.7 billion. Net ROPOA, the BSP said, remained at 4.2 percent of total assets. Gross ROPOA, on the other hand, stood at seven percent of ROPOA plus TLP compared to 7.1 percent last month.

Overall asset quality, the BSP noted, deteriorated slightly, as reflected by a marginal hike in the ratio of non-performing assets (NPL plus net ROPOA) to total assets. The ratio increased to 12.8 percent in August, from July’s 12.7 percent, as the 1.5 percent hike in NPAs outpaced the 0.5 percent increase in total assets.