Banks’ NPL ratio improves to 3.25% in March

MANILA, Philippines – The ratio of non-performing loans (NPL) of universal and commercial banks to the industry’s total loan portfolio continued to improve as of end-March this year as corporate and individual borrowers were able to pay their outstanding financial obligations on time, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data showed that the NPL ratio of universal and commercial banks improved to 3.25 percent in March from 3.56 percent in the same month last year due to the continued drop in the value of soured loans as well as the expansion in the industry’s total disbursed loans.

The ratio in March was slightly higher than the 3.18 percent ratio registered in February.

The BSP said the value of banks’ bad loans went down by 7.05 percent to P82.33 billion in March from P88.58 billion in the same month last year but was P50 million higher than the P82.28 billion registered in February this year.

On the other hand, the industry’s total loan portfolio (TLP) inched up by 1.81 percent to P2.531 trillion in March from P2.486 trillion in the same month last year. The loan portfolio was 2.05 percent, or P53 billion, lower than the February level of P2.584 trillion.

BSP officials said the country’s resilient economy and better corporate earnings as well as lower interest rates enabled borrowers to service their financial obligations on time.

Despite the full impact of the global economic meltdown, the Philippines avoided recession last year as the country’s domestic output as measured by the gross domestic product (GDP) eased to 0.9 percent last year from 3.8 percent in 2008.

This year, economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s GDP expanding between 2.6 percent and 3.6 percent.

On the other hand, average inflation eased to 4.3 percent in the first four months of the year from 6.4 percent in the same period last year enabling the BSP’s Monetary Board to keep its key policy rates at record lows.

Monetary authorities slashed its key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis. This brought the overnight borrowing rate to a record low of four percent and the overnight lending rate to six percent.

The gross assets of universal and commercial banks increased to P5.577 trillion in March from P5.105 trillion in the same month last year. The industry’s gross assets was slightly higher than the end-February level of P5.56 trillion.

Meanwhile, the industry’s non-performing assets (NPA) declined by 7.3 percent to reach P214.59 billion from P231.51 billion. The amount was lower than January’s P215.26 billion.

This resulted in a better NPA ratio of 3.85 percent in March from 4.53 percent in the same month last year.

Likewise, the loan loss reserve of banks went up by 5.56 percent to P92.93 billion from P87.96 billion resulting to a better NPL coverage ratio of 112.87 percent from 99.3 percent as banks provided adequate provisioning against potential credit losses. –Lawrence Agcaoili (The Philippine Star)