Banks’ NPLs won’t exceed 18% — BSP

The banking sector’s non-performing loans (NPLs) should not exceed 18 percent of total loan portfolio (TLP) this year notwithstanding concerns that the economic slump will make it harder for banks to collect from their borrowers.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando Tetangco Jr. said the banking industry’s NPLs, based on latest data, suggest that bad loans will stabilize at about 18 percent.

"While there are some sectors that are not doing well, the industry is still expected to do well this year in terms of bad loans," Tetangco said.

As of end-September, the NPLs of the country’s 45 commercial banks improved to 17.92 percent, slightly lower than the historic high of 18.03 percent of its total loan portfolio in August.

The BSP attributed the improvement to the increased lending activities of commercial banks.

However, there are serious concerns that the bad loans of banks will shoot up more than 20 percent, especially since major battery manufacturer Ramcar

Inc. failed to meet its loan obligations of P7.9 billion.

Of its total loan, Ramcar got P6.1 billion in uncollateralized loans from about 19 creditors while P1.8 billion were secured loans.

In a related development, the Philippine Chamber of Commerce and Industry (PCCI) urged banks to give borrowers some breathing room and declare a temporary moratorium on credit collection.

Former Allied Bank president and PCCI consultant Peter Favila said the PCCI is appealing to the banking community to ease up a bit on credit collection.

He warned that insisting that borrowers settle their loans as scheduled will further compound the financial woes of borrowers and could spark a credit crisis, especially among those whose industries or enterprises have been hard hit by the global and domestic economic slump.

As a result, many borrowers are not able to settle maturing obligations because of severe cash flow problems arising from the economic crisis. This is further aggravated by the refusal of banks to extend and renew their credit lines.

"These industries need some form of relief," Favila said.

He explained that the PCCI is not asking for a condonation of the loans but to defer and reschedule the repayment of maturing loans until such time the economy has recovered a bit.

Favila, who was also the former head of the Philippine National Bank, said the PCCI has formally adopted this proposal and endorsed the same to Malacañang this week.