Banks’ bad loans down 4%

MANILA, Philippines - The non-performing loans of banks went down in the third quarter from a year ago, indicating the industry’s continued efforts to keep prudent lending standards.

Bangko Sentral ng Pilipinas data showed banks’ gross non-performing loans (NPL) fell four percent to P140.209 billion as of September from P145.928 billion in the same period last year.

This is against a 19-percent growth in banks’ total loan portfolio to P5.413 trillion during the period, bringing the NPL ratio of banks to 2.59 percent.

Soured loans 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.

The September NPL ratio was an improvement from the 3.21 percent recorded in the same period last year and the 2.68 percent in end-June this year.

The BSP monitors the loan quality of banks to maintain high credit underwriting standards, which is needed to keep the domestic financial system stable.

Aside from improving their bad loan ratios, banks have increased their NPL coverage to 116.49 percent as of September from 110.52 percent in the same period in 2013.

Setting aside for NPLs is a prudential measure meant to mitigate any potential credit losses.

Latest BSP data showed lending by universal and commercial banks increased by 20.5 percent to P4.21 trillion in September.

The bulk or 90.4 percent of the total loan portfolio went to production activities, reflective of the strong growth in the domestic economy.