NPL ratio eases to 8-month low in November

MANILA, Philippines —  The non-performing loan (NPL) ratio of Philippine banks declined to an eight-month low of 4.35 percent in November last year from 4.42 percent a month ago, as the industry’s asset quality continues to improve amid the recovery from the impact of the pandemic.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the NPL ratio last November was the lowest since the 4.21 percent recorded in March last year, as the level of loans disbursed by Philippine banks continues to improve.

After hitting a 13-year high of 4.51 percent in July and August last year, the NPL ratio of banks operating in the country steadily improved in September, October and November despite the reimposition of strict lockdown and quarantine measures amid the emergence of the Delta variant.

Loans disbursed by local banks expanded by 4.3 percent to P11.08 trillion from January to November last year compared to P10.62 trillion in the same period in 2020.

During the 11-month period, the industry’s bad debts accelerated by 19.1 percent to P481.88 billion from P404.69 billion. The monthly NPLs have been rising steadily since January last year, but declined in September before rising again in October.

The asset quality of the industry has been deteriorating as banks have been piling up NPLs or past due loan accounts, as well as bad debts due to the impact of the pandemic.

NPL or past due loans are loans where the principal or interest is unpaid for 30 days or more after due date.

As of end-November last year, the past due loans   increased by 7.9 percent to P567.51 billion from P507.69 billion a month ago for a past due ratio of 5.12 percent.

The sector’s restructured loans amounted to P344.89 billion in end- November last year, almost 2.5 times the P139.61 billion booked in the same month in 2020, translating to a restructured loan ratio of 3.08 percent.

Amid rising defaults due to the impact of the pandemic-induced recession, the allowance for credit losses increased by 19 percent to P419.86 billion from P352.73 billion for a higher loan loss reverse level of 3.79 percent.

This translated to an NPL coverage ratio of 87.13 percent in end- November last year.

Likewise, the industry’s non-performing assets (NPA) expanded by 15.8 percent to P600.91 billion from P519.02 billion, resulting in an NPA to gross asset ratio of 2.89 percent.

Sanjiv Vohra, president and CEO at Security Bank, said the bank continues its proactive provisioning based on a rolling view on the intensity of the credit challenge in the last two years.

“We have consistently said that forecasting a peak in terms of banking industry’s NPL or our bank’s NPL is tricky and difficult, as this is highly dependent on the eventual reopening of the economy,” Vohra said.

Vohra said the listed bank has noted a significant reduction in its 2021 provisions or credit costs compared to 2020.

“Ultimately, this is still going to be tied to the performance of the economy moving forward,” Vohra told The STAR.