Banks’ NPL ratio improves in November

The non-performing loan (NPL) ratio of local commercial banks improved to 18.76 percent in November last year from a record 18.81 percent in October as the industry recorded a slight improvement in lending activity, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

"The November data is positive to the extent that it may indicate a stabilization in the trend for bad loans after a year of relatively steady deterioration," said Gene Frieda, economist of 4Cast Ltd. in Singapore.

The actual bad loans of the country’s 44 commercial banks edged up by 0.9 percent to P294 billion in November last year from P291 billion a month ago. This was offset, however, by a 1.1-percent increase in total loans to P1.566 trillion in November from P1.594 trillion in October.

The BSP also said only 45 percent of operating commercial banks reported higher NPL ratios in November compared to 61 percent the previous month.

There was also an increase in banks’ coverage Banks’ NPL… From Page 17

ratio, or the ratio of loan loss reserves to NPLs, to 42.5 percent at end-November from 42.2 percent in October.

"The (month-on-month) increase in loan-loss reserves of P2.1 billion, or 1.7 percent, outpaced the P2.6 billion or 0.9 percent rise in NPLs," the BSP said.

However, Frieda said high NPLs and poor loan-loss provisioning by Philippine banks at less than 45 percent of total loans "should prove a drag" on any likely economic recovery this year.

The ratio of gross restructured loans to total loans went down slightly to 7.1 percent in November from 7.2 percent the previous month as gross restructured loans slowed to 0.2 percent to P111.2 billion.

The ratio of banks’ holdings of real and other properties owned and acquired (ROPOA) to gross assets rose to 4.92 percent from 4.87 percent as ROPOA grew faster than gross assets during the review period.

Government is preparing a set of laws to pave the way for foreign investors to buy bad loans from local banks.

Among those that have expressed interest in buying up the NPLs are US investment house Lehman Brothers Holdings Inc. and the World Bank’s International Finance Corp.

Lehman Brothers last week signed a memorandum of understanding to set up a $1 billion "Philippine Recovery Fund" that would acquire the non-performing assets of banks as well as finance mass housing and other projects.

Bank analysts, however, said the creation of an asset management company in the country might be hard because of banks’ reluctance to take losses by disposing of these loans at discounted prices.

The Philippine National Bank and the Metropolitan Bank and Trust Co. are planning to separately sell their sour loans or non-performing loans estimated at P45 billion to an AMC.

PNB president Feliciano Miranda said an initial P20 billion of the bank’s ROPOA will be sold to an AMC in joint venture with one of several groups that offered to put up such a facility.

Metrobank, on the other hand, announced it will sell more than P15 billion worth of its NPLS to an AMC to be established by Lehman Brothers.

Banking sources said there are at least seven groups that have expressed interest in the planned disposal of P20 billion worth of bad assets of PNB. The sources said the same groups that have earlier set their eyes on the assets of Land Bank of the Philippines have also offered to do the same for PNB.

These groups include Cerberus Ltd., Lone Star Asia-Pacific Investment Ltd., Lehman Brothers, Deutsche Bank Ag, JP Morgan Chase and Co., and Bank of America.