Banks’ bad loans drop in November

MANILA, Philippines — The bad loans of the commercial banking sector dropped slightly in November last year to 3.78 percent of their total loan portfolio – the lowest recorded ratio recorded since the 1997 financial crisis, the Bangko Sentral ng Pilipinas (BSP) said in a report.

Based on its latest available data, the BSP said the non-performing loans (NPL) ratio of universal and commercial banks (U/KBs) eased from 3.97 percent in October 2008.

The improvement in the bank’s soured loans in November was due to the 4.77-percent expansion in total loans of commercial banks to P2.47 trillion during the month.

This was accompanied by a 0.28-percent decline in bad loans to P93.3 billion, the central bank added.

The rural banking industry, however, did not fare as well as bank regulators reported a slight increase in the industry’s bad loans from that brought the ratio back to double-digit levels.

Rural banks saw an increase in their NPLs, which now accounted for 10.13 percent of the industry’s total loan portfolio or TLP, at the end of the third quarter of 2008 compared from 9.86 percent in 2007.

The central bank said last month it expects a slight rise in bad loans this year as the global financial turmoil bears down on the local economy. But it said any increase would not reach levels hit after the Asian financial crisis.

 Bad loans were at 3.37 percent of total loan portfolio in June 1997 shortly before the Asian financial crisis erupted and sent the ratio to a peak of more than 18 percent in October 2001 following defaults by corporate borrowers.

The banks’ bad loan ratio has significantly improved after the government imposed a law that granted incentives to buyers of banks’ soured assets for a limited period. The law expired last year.

According to the BSP, the NPLs of the commercial and universal banking sector dropped to P93.32 billion from P93.58 billion in October while TLP grew to P2.47 billion from P2.357 billion.

On the other hand, the BSP said the industry’s real and other properties acquired (ROPA) to gross assets (GAs) ratio favorably dropped to 2.76 percent from October’s 2.87 percent and year-ago’s 3.44- percent ratios.

The easing of the ratio from the October level occurred as the 2.69-percent decline in ROPA to P138.65 billion was complemented by the expansion in GAs.–Des Ferriols, Philippine Star