Banks’ bad loans ratio stands at 2.75% in May

MANILA, Philippines - The non-performing loans (NPL) ratio of universal and commercial banks stood at 2.75 percent in May from 2.74 percent in April, the Bangko Sentral ng Pilipinas reported yesterday.

The latest figure, according to the central bank, reflects the steady decline in the NPL ratio in the past years.  “While there is already an indication of strong credit risk management on the part of universal and commercial banks, the trend is made more impressive by the fact that the total loan portfolio continues to rise,” the BSP said.

As of end-May, the banks’ total loan portfolio expanded by 1.1 percent to P3.69 trillion.

NPL ratios have been on a downward trend for loans extended to the financial intermediation, real estate, manufacturing and wholesale and retail sectors, which collectively account for 62.39 percent of the total loan portfolio of banks.

Despite the decline in NPL ratios, banks have been setting aside a greater amount of funds than their outstanding NPLs.  BSP data show that the value of loan loss reserves went up to P130.26 billion as of May, translating to a gross NPL coverage ratio of 128.5 percent.

The BSP earlier amended the reporting standard for NPLs in which banks have been required  to report their “gross” NPLs and their “net” NPLs.

Gross NPLs represent the actual level of NPL without any adjustment for loans treated as “loss” and fully provisioned. Net NPLs is just the gross NPLs less specific allowance for credit losses on TLP.