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Philippines: Banks’ NPL ratio eases to 3.61% in December
MANILA, Philippines — The gross non-performing loan (NPL) ratio of Philippine banks eased to 3.61 percent in December after accelerating for 11 straight months in 2020, according to the Bangko Sentral ng Pilipinas (BSP).
The latest NPL level was lower than the 3.78 percent recorded in November, but higher than the 2.04 percent recorded in December 2019. However, this was the highest gross NPL ratio since the 3.48 percent recorded in January 2013.
Data prior to 2013 are not consistent with the Department of Supervisory Analytics as the financial reporting package started in that year.
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.
Prior to the decline in December, the bad loan ratio of the country’s banking industry has steadily increased since the 2.16 percent recorded in January last year due to the pandemic.
Soured loans of the banking industry soared by nearly 75 percent to P391.66 billion in end-December 2020 from P224.1 billion in end-2019. This was slightly lower than the record P404.69 billion in end-November last year.
On the other hand, the sector’s loan portfolio slipped for the first time in more than 14 years, dropping by about one percent to P10.86 trillion in end-2020 from P10.97 trillion a year ago despite the aggressive 200 basis points cuts in interest rates by the BSP to cushion the impact of the pandemic on the economy.
Data from the central bank showed past due loans referring to all types of loans left unsettled beyond payment date jumped by 62.1 percent to P482.11 billion from P297.25 billion for a past due ratio of 4.44 percent.
Likewise, the industry’s restructured loans reached P207.278 billion in end-2020, 4.8 times the P43.16 billion booked in end-2019, translating to a restructured loan ratio of 1.91 percent.
The level of bad debts and NPL ratio of the sector are seen rising further as the debt holiday given to consumers under Bayanihan 1 and 2 has expired last year.
Congress has granted debt moratoriums under Republic Act 11469 or Bayanihan to Heal as One Act and RA 11494 or Bayanihan to Recover As One Act (Bayanihan 2).
In anticipation of rising defaults brought about by uncertainties due to the pandemic, the industry allowance for credit losses surged by nearly 77 percent to P367.09 billion in end- December last year from a year-ago level of P207.51 billion, representing a loan loss reserve ratio of 3.38 percent.
This helped improve the industry’s NPL coverage ratio to 93.73 percent from 92.59 percent.
Cezar Consing, president of Ayala-led Bank of the Philippine Islands (BPI) and Bankers Association of the Philippines (BAP), earlier said the industry expects the NPL ratio to peak at six to seven percent, lower compared to the peak recorded during the Asian financial crisis.
Source: https://www.philstar.com/business/2021/02/10/2076532/banks-npl-ratio-eases-361-december