Banks’ bad loan ratio eases in 2008

UNIVERSAL and commercial banks registered a modest improvement in their bad loan ratio last year, dropping to its lowest since the ratio peaked in 2001, the Bangko Sentral ng Pilipinas (BSP) said.

In a statement, the BSP said the non-performing loans ratio of this segment of the banking industry eased to 3.52 percent in December last year from 3.75 percent in November and 4.45 percent in December 2007.

The December figure is the lowest recorded since the ratio peaked at 18.81 percent in October 2001.

The BSP said the easing of the ratio from the previous month came about as the 4.84-percent decline in bad loans was accompanied by the 1.33-percent expansion in lenders’ total loan portfolio.

The amount of bad loans dropped to P88.19 billion in December last year from P92.68 billion in November. Non-performing loans refer to past due loan accounts whose principal and/or interest is unpaid for thirty days or more after the due date.

Universal and commercial banks’ total loan portfolio, which is the amount of loans extended to the public, increased to P2.502.33 trillion last December from P2.469.54 trillion in November last year.

Exclusive of inter-bank loans, the bad loan ratio eased to 3.87 percent from November’s 4.15 percent and the December 2007 figure of 5.27 percent. The month-on-month movement occurred as the drop in bad loans came with the 1.97-percent growth in regular loans to P2.277.84 trillion.

Real and other properties acquired (ROPA) also dipped to 2.73 percent of the banking segment’s gross assets from 2.76 percent in November last year and 3.33 percent in December 2007.

The improvement took place as the 1.57-percent hike in ROPA to P140.83 billion was outweighed by the expansion in gross assets.

As a result, the total non-performing assets ratio dropped to 4.45 percent in December from 4.61 percent in November last year and 5.22 percent in December 2007.

The amount of non-performing assets stood at P229.02 billion, down from November’s P231.33 billion and the December 2007 figure of P239.74 billion.

Restructured loans dropped to 2.20 percent of total loans in December from 2.30 percent in November last year and 2.97 percent in December 2007. The decline in the ratio from November was brought about by the 2.84-percent fall in gross restructure loans to P55.54 billion.

The BSP said the industry also provided adequate provisioning against potential credit losses.

The bad loan coverage ratio strengthened to 100.01 percent in December from 94.94 in November last year.

Universal and commercial banks continued to account for almost 90 percent of the banking industry’s total resources. Total assets rose by 13.9 percent to P5.7 trillion at end-October from P5 trillion in the same period in 2007.

The BSP expects the banking industry to improve its asset quality this year on the back of continued growth in the deposit base and slower up tick in the bad loans ratio. The non-performing loan ratio is unlikely to reach double-digits this year or near the Asian crisis level of 18 percent, it said. -Maricel E. Burgonio, Reporter, Manila Times