Banks’ bad loans rise amid slowdown

THE bad loan ratio of universal and commercial banks edged up in January this year as the amount of non-performing debt rose amid a drop in total outstanding loans, the Bangko Sentral ng Pilipinas (BSP) said.

In a statement, the BSP said the industry’s bad loan ratio inched up to 3.82 from 3.52 percent last December. Year-on-year, the ratio however was lower than the 4.64 percent recorded in January last year.

“The month-on-month increase in the ratio took place as the 3-percent hike in [bad loans] was accompanied by the 4.91-percent decline in total loan portfolio,” the BSP said.

Bad or non-performing loans refer to past due loan accounts whose principal and/or interest is unpaid for 30 days or more after due date.

The amount of bad loans went up to P90.84 billion in January from P88.19 billion in December last year, while the total loans outstanding dropped to P2.379.45 trillion from P2.502.33 trillion over the same period.

The rise in the bad loan ratio was due to the 3-percent growth in non-performing loans and the 8.22-percent drop in regular loans to P2.090.51 trillion.

Exclusive of inter-bank loans, the bad loan ratio also went up to 4.35 percent in January from 3.87 percent in December but improved from 5.50 percent in January last year.

The industry’s real and other properties acquired (ROPA) also rose to 2.76 percent of gross assets in January from 2.73 percent in December, but eased from 3.39 percent in January last year.

The month-on-month movement came about as the 0.49-percent drop in ROPA to P140.14 billion was outweighed by the larger contraction in banks’ gross assets.

The industry’s non-performing assets also rose to 4.57 percent of its gross assets from the previous month’s 4.45 percent but eased from a year ago’s 5.32 percent ratio.

The month-on-month increase in the ratio was brought on by the 0.85-percent growth in bad assets, accompanied by the 1.86-percent decline in gross assets.

The industry’s non-performing assets stood at P230.97 billion, up from the previous month’s P229.02 billion, but favorably down from a year ago’s P238.91 billion. Bad assets is the sum of bad loans and ROPA.

Restructure loans similarly climbed to 2.29 percent of total loans from the previous month’s 2.20 percent but dropped from a year ago’s 3.09 percent ratio. The increase in the ratio occurred amid the 1.19-percent fall in gross restructured loans to P54.88 billion.

In terms of provisioning for bad loans, the bad loan coverage ratio narrowed to 96.82 percent from last December’s 100.01 percent.

The industry continued to account for almost 90 percent of the total resources of the banking system. Total assets of the banking system rose by 13.9 percent to P5.7 trillion at end-October last year 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 uptick in the bad loans ratio amid the global financial crisis. Banks’ non-performing loan ratio is unlikely to reach double-digit level this year or near the Asian crisis level of 18 percent, the central bank said. –Maricel E. Burgonio, Senior Reporter, Manila Times