Banks’ NPL ratio improves in Q1

MANILA, Philippines - The Philippine banking system improved its bad loans ratio in the first quarter from the same period last year, a Bangko Sentral ng Pilipinas report showed.

In its Quarterly Report on Economic and Financial Development, the central bank said the banking system’s gross non-performing loans (NPL) ratio fell to 2.7 percent as of end-March from 3.4 percent in the same period in 2013.

“Banks’ initiatives to improve asset quality along with prudent lending regulations helped bring the NPL ratio to below its pre-Asian crisis level of around 3.5 percent,” the BSP stressed.

Soured loans during the period went down 4.1 percent to P137.7 billion, while the banking system’s total loan portfolio climbed 19.5 percent to P5 trillion, the central bank said.

The BSP noted that despite the decline of the country’s banking system’s bad loans ratio, it was higher than Indonesia’s two percent, Malaysia’s 2.4 percent, South Korea’s 1.8 percent, and Thailand’s 2.3 percent.

However, the central bank has pointed out “the loan exposures of banks remained adequately covered.”

Such is the case as the NPL coverage ratio increased to 116.9 percent as of the first quarter from 109.3 percent in end-March last year.

“The ratio was indicative of banks’ continued compliance with the loan-loss provisioning requirements of the BSP to ensure adequate buffers against potential credit losses,” the central bank recounted.

The central bank monitors the loan quality of banks in order to promote prudent risk management practices. Such is seen significant in keeping with its mandate of financial stability.