Banks’ NPL ratio lowest since 1997 financial crisis

MANILA, Philippines – The bad loans ratio of universal and commercial banks fell to its lowest level since the Asian financial crisis battered major economies in the region, including the Philippines, in 1997 as the industry’s total loan portfolio 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.

Data released by the central bank showed that the non-performing loans (NPL) ratio of banks improved further to 2.80 percent in May from 2.95 percent last April and from 3.31 percent in May last year.

“This ratio matches the end-December 1996 ratio, which is the lowest NPL ratio prior to the 1997 Asian crisis,” the BSP stressed.

The BSP said the expansion in the industry’s total loan portfolio outpaced the increase in non-performing loans.

Loans extended by universal and commercial banks rose 14 percent to P2.929 trillion as of end-May from P2.569 trillion as of end-May last year. The industry’s total loan portfolio was also 3.5 percent higher than the end-April level of P2.83 trillion.

On the other hand, the industry’s non-performing loans declined 3.57 percent to P81.91 billion in May from a year-ago level of P84.94 billion. The level was 1.83 percent lower than the end-April level of P83.44 billion.

The gross assets of universal and commercial banks expanded 9.57 percent to P6.23 trillion in end-May from a year-ago level of P5.686 trillion while the industry’s non-performing assets (NPA) retreated 4.21 percent to P206.36 billion from P215.44 billion.

Likewise, the BSP said the loan-loss reserve (LLR) of universal and commercial banks increased 7.93 percent to P101 billion from P93.58 billion.

“The industry provided adequate provisioning against potential credit losses,” the BSP pointed out.

The BSP earlier reported that banks operating in the Philippines posted their fastest growth in 25 months after expanding 18.8 percent in May due to increased domestic economic activities. Loans have been growing steadily at double-digit rates of 11 percent in January, 12.3 percent in February, 14.1 percent in March, 14.2 percent in April and 18.8 percent in May.

Despite the economic slowdown in the first quarter, loans extended to production activities grew 20.5 percent to P2.314 trillion as of end-May from P1.92 trillion in the same period last year as corporate borrowers sourced more loans from banks to bankroll their expansion programs.

In terms of growth, data showed that loans to the mining and quarrying sector posted the biggest growth of 223.5 percent, followed by the electricity, gas and water with 52.7 percent; real estate, renting and business services with 21.3 percent; financial intermediation with 20.4 percent; and the manufacturing sector with 20.2 percent.

In terms of amount, the manufacturing sector got the biggest share with P426.97 billion followed by real estate, lending and business services with P397.25 billion; agriculture, hunting and fisheries sector with P349.38 billion; wholesale and retail trade sector with P272.96 billion; and electricity, gas and water sector with P239.33 billion.

Data showed that the growth in the loans extended for household consumption was steady at 14.9 percent to P201.69 billion in end-May from P175.53 billion in the same month last year.

Latest data showed that earnings of universal and commercial banks increased about 17 percent to P21.65 billion in the first quarter of the year from P18.55 billion booked in the same period last year on the back of the industry’s strong interest and non-interest income.

Interest income of the industry improved 2.5 percent to P69.89 billion in the first quarter from P68.21 billion in the same quarter last year while non-interest income inched up 1.1 percent to P25.51 billion from P25.23 billion.

On the other hand, the industry’s interest expense climbed 4.9 percent in the first quarter of the year from P23.68 billion in the same quarter last year while non-interest expense went up 4.1 percent to P46.49 billion from P44.67 billion.

Monetary authorities said 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 total number of banks operating in the Philippines was reduced in the first quarter of the year as the bank regulator stepped up its campaign against problematic banks while major players in the banking industry continued to consolidate.

Data released by the central bank showed that the number of banks stood at 746 in the first quarter of the year or 12 fewer than the 758 as of end-December last year. The number of banks was also 33 less than the 779 banks that operated in the same quarter last year.

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. –Lawrence Agcaoili (The Philippine Star)