Banks’ bad loans rise to 16.23% in November

Higher interest rates and the lackluster demand for loans increased the commercial banking sector’s bad loans or non-performing loans (NPL) in November last year to 16.23 percent of total loan portfolio from 15.73 percent in the previous month.

The Bangko Sentral ng Pilipinas (BSP) said the increase in November was due primarily to the 1.8-percent hike in NPL levels even as total loan portfolio (TLP) went down by 2.5 percent from October.

The BSP noted that all three groups, universal banks, regular commercial banks and foreign banks registered higher NPL levels and lower TLP which consequently raised their NPL ratios to 17.76 percent, 18.92 percent and 3.88 percent, respectively, from the previous months’s 17.01 percent, 18.12 percent and 3.78 percent.

Meanwhile, the industry’s loan loss reserves went up 0.4 percent to P105.9 billion, from October’s P105.5 billion. The coverage ratio, however, was reduced to 41 percent from the previous month’s 41.6 percent as the rise in NPLs by P4.5 billion or 1.8 percent outstripped November’s P376 million or 0.4 percent additional provision against NPLs. Loan loss reserves further deteriorated to 6.7 percent of TLP.

The BSP added that November’s gross restructred loans went up 5.5 percent to P90.5 billion from October’s P85.8 billion and rose by 3.19 percent from P68.6 billion compared to the same period in the previous year.

The BSP said the higher interest rates made it difficult for borrowers to settle their obligations on time, resulting in the classification of these loans as past due or non-performing.

NPLs are loans whose principal and interest have remained unpaid for 30 days or more after due date.

The difficulty in paying loans as they fall due was also attributed to the decision of the BSP to raise its key policy rates last October by four percentage points after applying a percentage point increase in May and September.

Banks in turn, also raised their lending rates by about seven percentage points to 21 percent. – Rocel Felix