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Philippines: NPL ratio rises to 2.43% in May
MANILA, Philippines — The non-performing loan (NPL) ratio of Philippine banks rose for the fifth straight month to hit a five-year high of 2.43 percent in May from 2.31 percent in April, amid the sharp rise in past due as well as restructured loans due to the COVID-19 pandemic, according to the Bangko Sentral ng Pilipinas (BSP).
This was the highest gross NPL ratio since the 2.45 percent booked in May 2015. NPLs or bad debts refer to past due loan accounts where the principal or interest is unpaid for 30 days or more after due date.
Latest statistics from the central bank showed gross non performing loans amounted to P262.68 billion in May, about 20 percent higher than the P218.88 billion booked in the same month last year.
The industry’s loan book, on the other hand, inched up by only 7.3 percent to P10.81 trillion from P10.08 trillion as the entire Luzon was placed on enhanced community quarantine in the middle of March to prevent the spread of the virus.
Data showed past due loans, or loans left unsettled beyond payment date, surged by 89.2 percent to P566.15 billion from P299.15 billion for a past due ratio of 5.23 percent, while restructured loans went up by 25.4 percent to P48.19 billion from P39.52 billion for a restructured loan ratio of 0.45 percent.
Month-on-month, past due loans jumped by 36.2 percent to P566.25 billion in May from P415.74 billion in April as the economy stalled amid the measures to contain the spread of COVID-19.
This prompted banks to jack up the allowance of credit losses by 26.7 percent to P253.4 billion in May from P199.99 billion in the same month last year.
This translated to a higher NPL coverage ratio of 96.47 percent from 91.37 percent.
The NPL ratio for universal and commercial banks topped the two percent level for the first time since October 2014. It touched 2.04 percent in May, the highest since 2.05 percent recorded in October 2014.
On the other hand, the NPL ratio of thrift or mid-sized banks improved to 5.65 percent in May from 5.6 percent in April.
Philippine banks have been augmenting their respective war chests against bad loans in anticipation of higher defaults due to the impact of a more disruptive COVID-19 pandemic.
The regulator is not expecting a repeat of the sharp rise in NPLs during the Asian financial crisis more than two decades ago as stimulus measures have unleashed P1.3 trillion to soften the blow of the COVID-19 pandemic.
Based on stress testing exercises, the regulator expects higher NPL over the short run, but not as high as the peak during the Asian financial crisis in 1997 and 1998. The NPL ratio ranged from three to 3.4 percent in the first half of 1997 and peaked at 18.7 percent in 2001.
BSP Governor Benjamin Diokno said the implementation of COVID-19 measures has helped ensure ample liquidity as well as the proper functioning of the financial system during the lockdown.
Likewise, Diokno said a package of measures has helped reduced the financial burden on loans to micro, small and medium enterprises (MSMEs) and large enterprises that are not part of conglomerate structure by counting the amount as part of banks’ compliance with the reserve requirement ratio.
Source: https://www.philstar.com/business/2020/07/09/2026583/npl-ratio-rises-243-may