Banks’ non-performing loans ratio stands at 3.65%

MANILA, Philippines – The accumulated bad loans of universal and commercial banks were unchanged in April, staying well below the four-percent pre-1997 level at 3.65 percent as banks kept discarding non-performing loans, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said the annual decline in the banking industry’s proportion of non-performing loans to the total loan portfolio (TLP) would have been greater if not for the 4.45-percent decline in loans.

The BSP said that as of end-April 2009, the total NPLs of universal and commercial banks reached P86.78 billion, about 0.09 percent higher than the March level and significantly lower than the 4.28-percent level in April last year.

The BSP said the month-on-month level was slightly higher because the banks’ bad loans declined by only 2.03 percent compared with the overall decline in the total loan portfolio which dropped to P2.376 trillion from P2.486 trillion in March.

Net of interbank loans (IBL), however, the BSP said the NPL ratio rose much faster to 4.11 percent from 3.98 percent in March although this was an annual improvement from 5.03-percent ratio in April last year.

The monthly increase in the ratio occurred as the drop in NPLs was surpassed by the 5.03-percent reduction in regular loans to P2.113 trillion.

The BSP reported that the proportion of real and other properties acquired (ROPA) to gross assets (GA) climbed to 2.78 percent from 2.74 percent in March but eased from year ago’s 3.24-percent ratio.

On the other hand, the industry’s non-performing assets (NPA) to GA ratio went up to 4.51 percent from the March level of 4.49 percent but improved from year ago’s 5.33-percent ratio.

The month-on-month increase in the ratio came as a result of the 0.77-percent drop in NPAs which was outweighed by the 1.30-percent fall in GAs. The NPA level stood at P227.23 billion, down from P229 billion in March and last year’s P244.55 billion.

In terms of provisioning for bad loans, the BSP said the NPL coverage ratio strengthened to 99.65 percent from 99.30 percent in March. In contrast, the NPA coverage ratio narrowed to 48.85 percent from 49.11 percent, driven by the 1.30-percent decline in NPA reserves to P111 billion.

The BSP is expecting a slight uptick in the bad assets of banks, as a result of the global financial crisis.

BSP Governor Amando M. Tetangco Jr. told reporters that a slight increase in non-performing loans and non-performing assets is to be expected but said the asset quality of the banking system would remain sturdy.

“We will have to keep a close watch on the asset quality of banks to watch out for signs of stress,” Tetangco said. “But if there is an increase in bad assets, that’s only to be expected under the circumstances.”

The banking sector is expected to hit some difficult times as the country plowed deeper into the global financial crisis and the resulting widespread recession in the major trading economies around the world.

“Given what is happening abroad you cannot discount that there can be a slight uptick in NPL in the near term,” Tetangco said, “This is especially true when the effects of the recession in major economies really and truly starts to affect us.”

But Tetangco said the BSP considered this to be temporary and if it results in an increase in bad assets, the increase would be “slight and manageable.”

“We don’t foresee a substantial increase in bad assets,” Tetangco said.

More importantly, Tetangco said Philippine banks have already tightened their credit standards precisely to ensure that they would not end up accumulating bad loans.

“They are much more careful now and this is just the prudent thing to do when things are this uncertain,” Tetangco said. –Des Ferriols, Philippine Star