Banks’ NPLs dip to 17.35% in December

Increased lending activities and the rise in restructured loans and foreclosed assets pared down the bad loans or non-performing loans (NPLs) of commercial banks in December to 17.35 percent from 18.76 percent in the previous month.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Alberto Reyes said he could not yet give the final level of increase in restructured loans and foreclosed assets, saying the figures were still being reviewed.

Reyes said, however, that the NPL ratio level in December indicates a downturn in the bad loans or sourced accounts of the banking sector.

"The figure is indicative that the peak may have already been reached," he said.

The heavy exposure of banks in the real estate sector led to the rise in their NPL ratio, especially at the height of the Asian financial crisis in 1997.

The BSP has, since then, been prodding banks to establish special purpose asset vehicles or asset management companies (AMC) that will take care of soured loans and other non-performing assets.

Earlier, it was reported that US-based investment house Lehman Brothers and the country’s biggest commercial bank, Metropolitan Bank and Trust Company (Metrobank) were set to sign a memorandum of agreement (MOA) for a joint venture on an AMC. Metrobank will be the first bank to put its bad loans under an AMC.

Lehman Brothers has been conducting its due diligence work, much in the same fashion as another US-based concern known for coming to the aid of distressed or ailing banks and other companies, Cerberus Plc.

Lehman was earlier reported to have pledged to invest $1 billion to a venture dubbed "Philippine Recovery Fund" wherein the US-based company will buy NPL’s of Philippine banks at a discount and later, sell the assets to other investors.

The sources said they expect other banks with huge NPLs to follow suit after the Lehman-Metrobank deal is sealed.

Other banks that had earlier expressed interest in putting up AMCs are Equitable PCI Bank, Metropolitan Bank and Trust Co. and Land Bank of the Philippines.

The sources added that other banks like the Philippine National Bank and the United Coconut Planters Bank (UCPB) are also expected to create their respective AMCs once both banks have resolved their ownership issue.

Previoiusly, BSP Governor Rafael Buenaventura said the banks and Lehman Brothers are just waiting for the House of Representatives to consolidate the two securitization bills being pushed in the House. These are House bill 2759 entitled an Act to Establish the Legal and Regulatory Framework for Securitization and the Development of Asset-Backed Securities Market authored by Speaker Jose de Venecia and House Bill 2733 or the Secutization Act of 2001 authored by Rep. Ruben Torres. — Rocel Felix