Bad loans ratio improves in October

Universal and commercial banks (U/KBs) posted a slight improvement in bad loans ratio in October last year due to lower non-performing loans (NPL) and an increase in loan portfolio, the Bangko Sentral ng Pilipinas (BSP) said Tuesday.

In a statement, the BSP said the NPL ratio of the U/KBs decreased by 0.07 percentage point to 3.97 percent in October from 4.04 percent in September. This was also an improvement over the 5.30 percent ratio in October 2007.

“The month-on-month development transpired as the 0.44 percent decline in NPLs came with the 1.28 percent expansion in total loan portfolio [TLP],” BSP said.

Excluding interbank loans, the NPL ratio also eased to 4.47 percent from 4.56 percent in September and 6.17 percent in October 2007.

TLP, which reflects banks’ lending performance, went down to P93.58 billion in October compared with P94 billion in September and P105.12 billion in October 2007.

U/KBs expanded its TLP to P2.357 trillion in October last year from P2.327 trillion in September last year and P1.982 trillion in October 2007.

Meanwhile, real and other properties acquired (ROPA) to gross assets ratio of these banks dropped to 2.87 percent in October from 2.93 percent in September and 3.56 percent in the same month the previous year.

ROPA level, on the other hand, went up slightly to P142.49 billion in October compared with P142.39 billion in September but was lower than the P156.30 billion posted in October 2007.

U/KBs’ gross assets also increased to P4.943 trillion in October compared with P4.836 trillion in September and with P4.371 trillion in October 2007.

As a result, the banks’ total non-performing assets (NPA) to gross assets ratio decreased to 4.78 percent in October from 4.89 percent in September and 5.74 percent in October the previous year.

Despite the higher ROPAs, total NPAs improved to P236.07 billion in October from P236.39 billion in September and P250.93 billion in the same month in 2007.

In terms of provisioning of bad loans, the NPL coverage ratio widened to 95.17 percent in October from 94.91 percent in September.

Restructured loans inched up to P57.98 billion in October from P57.96 billion in September.

BSP Governor Amando Tetangco Jr., earlier said that banks’ bad loan ratio is expected to experience an uptick this year due to the economic slowdown with NPL ratio expected to be at 4 percent. But banks now have further tightened its credit standards to prevent any increase in bad loans.

Meanwhile, the extension of tax perks for the sale of banks’ bad assets has helped the banks in disposing a significant amount of their soured loans and ROPAs. Banks have sold P148.7-billion worth of bad assets through special purpose vehicles (SPVs) over the past four years. Such a sale entitles lenders to a number of tax and other perks, such as exemption from the value-added, documentary stamp and capital gains taxes. –Maricel E. Burgonio, Reporter, Manila Times