MANILA, Philippines - The non-performing loan (NPL) ratio of universal and commercial banks showed a slight improvement in the first three quarters of the year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
Big lenders’ NPL ratio improved to 2.05 percent as of September from 2.46 percent a year ago. It was also slightly better than the 2.08 percent in the first eight months of the year.
Excluding bank loans among themselves, the ratio also improved to 2.15 percent from 2.46 percent a year ago and 2.08 percent as of August, data showed.
NPL pertains to loans that remained unpaid 30 days after due date. The ratio reflects the proportion of NPL against banks’ total loan portfolio.
A lower ratio indicates a healthy balance sheets for lenders allowing them to lend more to drive consumption and investment, which in turn, could boost economic growth.
The “combined effect” of extending more loans and having some bad ones paid contributed to the industry’s better performance, the central bank said.
A total P3.410 trillion worth of loans were granted during the first nine months, up 12.91 percent from last year’s P3.020 trillion. The latest figure was also an improvement from P3.378 trillion as of August.
This, even as bad loans dipped to 5.91 percent year-on-year to P69.94 billion. The end-September tally also marked a slight decline from P70.43 billion in the first eight months.
Restructured loans - or those which were renegotiated for better terms such as longer maturities and lower interests - crawled up 1.03 percent to P35.50 billion.
Non-performing assets (NPA) - which include soured loans and foreclosed assets – likewise decreased during the period, figures showed. NPA totaled P176.34 billion from January to September, down from P191.06 billion last year and P177.12 billion last month.
“The industry’s provisioning against potential credit losses remained adequate,” BSP said.
As of the third quarter, NPL coverage ratio stood at 136 percent, while NPA coverage ratio reached 69.39 percent. Both indicators measure banks’ capacity to absorb losses from bad loans and assets.
Current NPL and NPA coverage levels showed improvements from 123.70 percent and 69.39 percent last year, respectively.
To support growth, BSP has cut policy rates by a total of 100 basis points this year, bringing them to record low level of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. BSP rates are used by banks as benchmarks for bank loan interest rates.