BSP: PH banks’ bad loans expand to P487B

BY MAYVELIN U. CARABALLOSEP, Manila Times, 11 Sep 2021

Figures released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed that the amount of bad loans in the Philippine banking system has risen to over P487 billion as of the end of July this year.

Lenders’ gross nonperforming loans (NPL) increased by 66.34 percent to P487 billion at the end of July, up from P292.76 billion a year earlier.

NPLs are past-due loans with an outstanding principal or interest balance of 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.

The entire loan portfolio of banks declined by 0.42 percent to P10.80 trillion at the end of July from P10.85 trillion a year ago, according to the data.

This translates to a gross NPL ratio of 4.51 percent, picking up from 4.48 percent in June and 2.70 percent a year ago. The percentage of problematic loans among all loans, including interbank loans, is represented by this number.

The current NPL ratio is at its highest level in nearly 13 years, or since September 2008, when it was at 4.52 percent.

In a recent report, Moody’s Investor Service warned that loan defaults by individuals and small and medium enterprises (SME) will drive growth in NPLs.

It said that, like in the previous 18 months, new NPLs will primarily come from the retail and SME groups as these borrowers have weak buffers to sustain lengthy cash flow shocks.

‘Many retail and SME borrowers will remain under stress as coronavirus cases surge again,’ Moody’s cautioned, noting that this puts banks focusing on the retail and SME segments, such as Union Bank of the Philippines and Rizal Commercial Banking Corp., at risk.

Conglomerates, on the other hand, will be more resilient since their diverse revenue streams will enable them to avoid a significant decline in cash flow, it added. Because loans to conglomerates accounted for a significant portion of banks’ gross loans, this will help lenders’ overall asset quality to some extent.

Despite the recent surge in NPLs, the debt watcher said its rated Philippines banks had enough buffers to cover additional loan losses after proactively boosting loan-loss provisions in early 2020 in anticipation of increased problem loans caused by the pandemic.

‘Philippine banks also have sufficiently strong capital to absorb unexpected loan losses. Their capital ratios will remain high in the next two years as their internal capital generation is likely to keep pace with loan growth,’ it continued.