Banks’ NPL ratio improves to 3.37%

MANILA, Philippines – The ratio of non-performing loans of universal and commercial banks to the industry’s total loan portfolio improved further to 3.37 percent in July from 3.49 percent in the same period last year as the surprising economic growth in the first half of the year as well as strong corporate earnings enabled borrowers to pay their outstanding financial obligations on time, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the BSP yesterday showed that the industry’s total loan portfolio went up at a faster rate of 7.11 percent to P2.545 trillion as of end-July this year from P2.376 trillion as of end-July last year while the non-performing loans (NPLs) of universal and commercial banks only increased by 3.44 percent to P85.73 billion from P82.88 billion.

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 half of the year would translate to better corporate earnings as well as lower interest rates.

The country’s GDP posted a surprising growth in the first half of the year expanding by 7.9 percent from 1.2 percent in the same period last year. The GDP grew by 7.9 percent in the second quarter from 7.8 percent in the first quarter of the year.

Last July, economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) raised the GDP growth target to a range of five percent to six percent instead of 2.6 percent to 3.6 percent this year due to the stronger-than-expected growth in the first quarter of the 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 1.1 percent last year from 3.8 percent in 2008.

The gross assets of universal and commercial banks increased by 8.6 percent to P5.56 trillion as of end-July this year from P5.121 trillion as of end-July last year while the industry’s non-performing assets (NPA) retreated by 3.6 percent to P214.66 billion from P222.63 billion.

Likewise, the BSP said the growth of loan loss reserve (LLR) of banks climbed by double-digit level of 10.6 percent to P96.29 billion as of end-July this year from P87.01 billion as of end-July last year. –Lawrence Agcaoili (The Philippine Star)