Banks’ NPL ratio improves in July

MANILA, Philippines - The non-performing loan ration (NPL) of universal and commercial banks improved as of July banks decreased their non-performing loans and grew their total credit portfolio, the Bangko Sentral ng Pilipinas reported over the weekend.

The NPL ratio of universal and commercial banks dropped to 2.11 percent as of July this year from 2.68 percent in the same period in 2013, reflecting banks’ prudent lending standards.

The latest level is virtually unchanged from the 2.10 recorded in June.

NPLs are obligations that remain unpaid for at least 30 days after the due date. The NPL ratio pertain to the amount of bad loans over the total loan portfolio.

Central bank data showed that the big banks slashed their soured loans to P95.193 billion as of July from P100.814 billion a year ago. Their total loan portfolio, meanwhile, went up to P4.514 trillion from P3.763 trillion.

At the same time, the banks have set aside higher loan loss reserves as compared to the actual level of bad loans.

Universal and commercial banks’ NPL coverage climbed to 140.49 percent as of July from 131.07 percent in the same period last year.

Provisioning for bad loans is a prudential measure meant to mitigate against any potential credit losses, the central bank has earlier said.  

The BSP monitors the loan quality of banks to maintain high credit underwriting standards, which is essential for keeping financial stability.

Aside from low NPL levels, the banking sector boasts of a P10.28-trillion asset base as of the first half of the year, reflecting banks’ strong and sound state. 

Central bank data also showed the banking system’s total loan portfolio amounted to P5.21 trillion, while deposit liabilities summed up to P7.9 trillion. Capital accounts of the banking sector, meanwhile, hit P1.2 trillion as of June.