Banks keep bad loans level low

MANILA, Philippines – Soured loans of major banks rose marginally in July but remained below two percent for eight straight months since November last year, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

Data from the central bank showed the gross non-performing loans (NPL) ratio of universal and commercial banks inched up to 1.90 percent of the banks’ total loan portfolio (TLP) as of end July this year from 1.84 percent in end June.

“The latest NPL figures indicate U/KBs’ continued adherence to high credit underwriting standards,” the BSP said.

A loan that is non-performing is in default or close to being in default as the debtor has not made his or her scheduled payments for at least 30 days.

The slight uptick was traced to the faster increase in the soured loans of major banks.

Lending by universal and commercial banks was almost unchanged at P5.114 trillion in end July from P5.11 trillion in end June, while the banks’ gross NPLs went up by 3.1 percent to P97.08 billion from P94.12 billion.

Despite keeping NPL levels low, major banks continued to allocate substantial reserves for potential credit losses at 140.15 percent of gross NPLs in end July from 143.35 percent in end June.

The BSP also reported the industry’s gross NPLs remained manageable across economic sectors as seen in financial and insurance activities; real estate; manufacturing; wholesale and retail trade; and electricity, gas, steam and air-conditioning supply that represented 68.6 percent of the industry’s total loan portfolio in July this year.

The central bank continues to monitor the loan quality of the universal and commercial bank industry in line with its supervisory efforts to foster sound credit risk management in the banking system.

“This is essential to the BSP’s policy objective of promoting financial stability,” it said.