Banks still 'upbeat' but expect bad loans to remain high: BSP


Posted at Jul 21 2021 07:02 PM

MANILA - The Bangko Sentral ng Pilipinas said Wednesday the banking industry remains optimistic despite forecasting the bad loan ratio remaining high in the short term.
​The BSP said banking industry leaders view the banking system as stable and expect double-digit growth in assets, loans, investments, deposits, and net income for the next two 2years, based on a central bank survey. 

“The upbeat expectations of the banking system based on the results of the Banking Sector Outlook Survey (BSOS) for the first semester of 2021 is testament to its confidence in the strong medium-term prospects of the country’s economy,” said BSP Governor Benjamin E. Diokno. 

Majority of the survey respondents however expect their non-performing loan ratio (NPL) to exceed 5 percent in the next two years, the BSP said.

Universal and commercial banks see their NPL ratio settling between 3 percent and 6.5 percent in the next 2 years, it added.

In comparison, the bad loan ratio of the banking industry was at 2.16 percent in January last year before the pandemic.

"This is, however, accompanied by greater prudence in the management of credit risk by the industry as higher number of banks intend to report NPL coverage ratio of more than 50 percent to 100 percent, the BSP said. 

BSP Governor Diokno meanwhile said the enactment of the Financial Institutions Strategic Transfer Act will help limit the build-up of NPLs in the financial system.

The FIST Act allows banks to offload bad loans to asset management firms. 

The BSP survey also showed banks see restructured loans ratio to be higher than 5 percent from earlier projections of between 3 to 5 percent of loans. 

"This reflects continued efforts of banks to grant financial relief to their borrowers through modifications in their loan payment terms," the central bank said. 

The BSP has kept interest rates at record lows and cut banks' reserve requirements to spur lending. But banks have been reluctant to lend amid worries over the ability of clients to repay their loans. 


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