Allied Bank’s bad loans ratio down to 2.44%

The non-performing loans (NPLs) of the Allied Banking Corp. (Allied Bank) has dropped to P1.4 billion, or 2.44 percent of total loan portfolio, from a high 13.1 percent in 2004.

The drop is attributed to the recent disposal of P2.6 billion worth of non-performing assets (NPAs) by the bank last December 2007 to a special purpose vehicle (SPV). Of the total amount, P2.4 billion were booked as NPLs and P200 million as real and other properties acquired (ROPA).

Allied Bank received a 20-percent cash settlement amounting to P504.5 million, with the balance charged completely against existing provisions.

Aside from improving its NPL ratio, the disposal of the NPAs improved the bank’s capital adequacy ratio (CAR) by 100 basis points (bps).

“We expect that CAR will improve to between 16 to 18 percent from 14.2 percent at the start of the year, after the successful launch of our Lower Tier 2 subordinated notes last month,” Reynaldo A. Maclang, Allied Bank president, said in a statement.

The notes were given a rating of “stable” by Moody’s Investor Services while the commercial bank’s financial performance was given a “positive” rating.

DOSRI loans and receivables were valued at P11.2 billion, or 21.42 percent of total loan portfolio. Return on equity (ROE) stood at 7.21 percent.

Allied Bank launched last month a Lower Tier 2 subordinated notes expected to raise P3 to P5 billion. In the last quarter of 2007, it also launched a $50-million (roughly P2.2 billion) upper Tier 2 fixed rate unsecured subordinated notes.

Maclang said funds raised from the exercise will be used to strengthen the bank’s capital base, earning assets and investment portfolios.

“It will be used to fuel the bank’s consumer or retail banking operations including credit card business, as well as fund the expanding mortgage and auto lending activities,” the bank president said.

It will likewise be used to fund complimentary and converging activities of the branch networks of both Allied Bank and sister firm, the Philippine National Bank (PNB).

For Allied Bank branches, funding will be used for upgrading, renovations and relocation exercises.

Officials said they are not thinking of expanding its branch network in the light of ongoing talks and studies regarding the proposed consolidation of the two commercial banks. If consolidated, the combined branch network would be over 600.

Meanwhile, the planned increase in capital to P20 billion from P500 million looms even larger within the next few months with the capital-raising exercises. It already has P12 billion in retained earnings as well as the P2.2 billion from is upper tier 2 fixed rate unsecured subordinated notes.