Banks' NPL ratio falls to 2.18% in January-May

MANILA, Philippines - Soured loans of universal and commercial banks as a proportion of their total loan portfolio continued to fall in May as more good loans were extended and lesser bad ones were incurred, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Non-performing loans (NPL) ratio fell to 2.18 percent in the first five months of the year, down from 2.80 percent in the same period in 2011 and 2.30 percent as of April.

Interbank lending, NPL ratio was at a higher 2.29 percent but was nevertheless below three percent as of May 2011 and 2.43 as of April.

Lesser bad loans mean Philippine banks remain healthy to provide credit and spur domestic demand to support a growing economy.

“The month-on-month movement took place as the drop in NPLs was complemented by the 1.36 percent expansion in regular loans,” a BSP statement said.

Total loans, net of interbank lending reached P3.104 trillion, 13.53 percent up from P2.734 trillion a year ago. It was also higher 1.36 percent from P3.062 trillion last April.

NPLs, on the other hand, declined 13.34 year-on-year, dropping to P70.98 billion from P81.91 billion. Month-on-month, NPLs dipped from P74.34 billion.

Meanwhile, the ratio of non-performing assets (NPA) - comprising NPLs and foreclosed assets - also fell to 2.71 percent from 3.26 percent and 2.77 percent.

“The industry’s provisioning against potential credit losses remained adequate,” the BSP said.

NPL coverage ratio - which measures banks’ capacity to cover for loan losses - rose 128.93 percent as of May from 123.31 percent the previous year. It was also an improvement from April’s 125.73 percent.