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Philippines: Banks’ bad loans ratio swells to 13-year high
MANILA, Philippines — Banks’ bad loans climbed for the fifth straight month in May to hit the highest level in almost 13 years as the country continues to struggle amid the resurgence of COVID-19 cases.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the gross non-performing loan (NPL) ratio of banks rose further to 4.49 percent in May from 4.35 percent in April.
The NPL ratio was the highest since the 4.52 percent level recorded in September 2008. In May last year, the ratio stood at 2.43 percent.
The asset quality of the industry has been deteriorating as banks have been piling up NPLs or past due loan accounts, as well as bad debts due to the impact of the COVID-19 pandemic.
Data released by the BSP showed soured loans of the banking sector jumped by 83 percent to P479.5 billion in May from P262 billion in the same month last year.
The banking industry’s total loan portfolio slipped by 1.2 percent to P10.67 trillion in May from P10.8 trillion last year.
This was despite the aggressive 200-basis-point cuts in interest rates by the Monetary Board, which brought the benchmark rate to an all-time low of two percent last year.
Data from the central bank also showed past due loans – referring to all types of loans left unsettled beyond payment date –rose by 5.2 percent to P593 billion from P564 billion for a past due ratio of 5.56 percent.
Likewise, the industry’s restructured loans amounted to P263.51 billion in May or 5.5 times the P48.09 billion booked in the same month last year, translating to a restructured loan ratio of 2.47 percent.
In anticipation of rising defaults due to the impact of the pandemic-induced recession, the banking sector’s allowance for credit losses surged by 50.4 percent to P383.4 billion from P255 billion.
This translated to an industry’s NPL coverage ratio of 79.96 percent in May from 97.31 percent last year. The coverage ratio has been declining since hitting 93.86 percent in January.
On the other hand, the industry’s non-performing assets (NPA) went up by 59.3 percent to P597.09 billion this year from P374.71 billion last year.
Borrowers were given reprieve via loan payment extension mandated under Republic Act 11469 or the Bayanihan to Heal as One Act (Bayanihan 1) and RA 11494 or Bayanihan to Recover As One Act (Bayanihan 2). The relief measures expired in June and December last year, respectively.
BSP Governor Benjamin Diokno earlier said the industry’s NPL ratio is seen exceeding six percent this year, prompting the regulator to closely monitor the financial performance of the hardest-hit sectors and highly vulnerable banks.
“The current challenges in the financial performance of the hardest-hit sectors and highly vulnerable banks warrant closer coordination and monitoring to ensure the banking system’s financial stability and continuing resilience,” Diokno said.
The regulator sees banks offloading P152 billion worth of bad assets via RA 11523 or the Financial Institutions Strategic Transfer (FIST) Act, helpin
Source: https://www.philstar.com/business/2021/07/09/2111119/banks-bad-loans-ratio-swells-13-year-high