Banks’ NPL ratio drops below 3%

MANILA, Philippines – The soured loans ratio of universal and commercial banks continued to improve and is now below three percent as loans grew while non-performing loans declined on the back of the country’s resilient economy.

The Bangko Sentral ng Pilipinas (BSP) reported over the weekend that the non-performing loans (NPL) ratio of banks improved to 2.93 percent as of end-February from 3.18 percent as of end-February 2010 and 3.01 percent as of end-January this year.

The total loan portfolio of universal and commercial banks increased 7.85 percent to P2.787 trillion as of end-February from a year-ago level of P2.584 trillion while the NPLs of universal and commercial banks retreated 0.6 percent to P81.79 billion from P82.28 billion.

The gross assets of universal and commercial banks posted a double-digit growth of 10 percent to P6.12 trillion in February from a year-ago level of P5.56 trillion while the industry’s non-performing assets (NPA) retreated 4.26 percent to P206.14 billion from P215.26 billion.

Likewise, the BSP said the growth of loan loss reserve (LLR) of universal and commercial banks inched up 6.6 percent to P97.79 billion from P91.74 billion.

The country’s banking sector’s total resources posted a double-digit growth of 11 percent to P7.23 trillion last year from P6.51 trillion in 2009.

Data showed that resources of universal and commercial banks expanded 11 percent to P6.42 trillion last year from P5.78 trillion in 2009 and accounted for about 89 percent of the industry’s total assets.

On the other hand, assets of thrift banks grew 13.1 percent to P629 billion last year from P556.1 billion and cornered a share of 8.7 percent of the total assets of banks.

On the other hand, the number of banks retreated by 27 to 758 last year from 785 in 2009 due to mergers as well as the closure of some banks.

The number of universal and commercial banks was steady at 38 followed by thrift banks with 73 while the number of rural banks fell to 647 from 674.

The data showed that the operating network including branches of the banking system inched up 2.9 percent to 8,869 last year from 8,620 in 2009, reflecting mainly the increase in commercial and rural banks’ branches or agencies.

Monetary authorities led by BSP Governor Amando M. Tetangco Jr. believed that 2010 was a banner year for Philippine banks contributing largely to the country’s stronger-than-expected economic growth amid the fragile recovery in advanced economies led by the US as well as the debt crisis in Europe.

The average capital adequacy ratio (CAR) as of end-June 2010 remained healthy at 15.2 percent on a solo basis and 16.2 percent on a consolidated basis exceeding both the statutory level of 10 percent set by the BSP and the international standard of eight percent set by the Bank for International Settlements (BIS).

It pointed that the Philippine banking system’s CAR continued to be slightly higher than those of Malaysia with 14.6 percent and Korea with 14.6 percent but moderately lower than Thailand with 16.7 percent. Indonesia posted the highest CAR in the region at 17.2 percent. –Lawrence Agcaoili (The Philippine Star)