Bad loans ratio improves to 3.27% in June

MANILA, Philippines – The ratio of soured loans of universal and commercial banks to the industry’s total loan portfolio improved further in June as corporate and individual borrowers were able to pay their outstanding financial obligations on time in light of the strong corporate earnings as well as faster-than-expected economic growth, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data from the BSP showed that the industry’s total loan portfolio went up at a faster rate of 6.5 percent to P2.681 trillion as of end-June this year from P2.518 trillion a year ago while the non-performing loans (NPLs) of universal and commercial banks only increased by 3.6 percent to P87.67 billion from P84.62 billion.

This resulted in a 0.09 percentage point decline in NPL ratio to 3.27 percent in end-June from 3.36 percent in end-June last year and 0.10 percentage point lower than the 3.37 percent in end-May.

The BSP, likewise added that May was the 21st consecutive month that the NPL ratio has been below four percent.

BSP officials believe that the NPL ratio of banks would continue to improve as the stronger-than-expected gross domestic product (GDP) growth in the first quarter of the year would translate to better corporate earnings as well as lower interest rates.

The country’s GDP growth zoomed to its fastest level in almost three years after expanding by 7.3 percent in the first quarter of the year from 0.5 percent in the same quarter this year.

This prompted economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) to raise the GDP growth target to a range of five percent to six percent instead of 2.6 percent to 3.6 percent this year.

For next year, the DBCC has set a GDP growth target of between seven percent and eight percent.

Stronger domestic output, officials explained, would help corporate and individual borrowers 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 GDP eased to 0.9 percent last year from 3.8 percent in 2008.

The gross assets of universal and commercial banks was steady surged 9.7 percent to P5.708 trillion as of end-June this year from P5.202 trillion as of end-June last year while the industry’s non-performing assets (NPA) retreated by 3.7 percent to P217.19 billion from P225.47 billion.

Likewise, the BSP said the growth of loan loss reserve (LLR) of banks climbed by double-digit rate of 10.1 percent to P95.39 billion as of end-June this year from P86.6 billion as of end-June last year. –Lawrence Agcaoili (The Philippine Star)