Bad loans of big banks down in June

MANILA, Philippines - Soured loans continued to decline in June from the previous month, reflecting the banking industry’s efforts in adhering to prudent lending standards, the Bangko Sentral ng Pilipinas said.

“We are pleased to note that the NPL (non-performing loans) ratio of universal and commercial banks remains low at only 2.1 percent as of June 2014,” BSP Governor Amando M. Tetangco Jr. said over the weekend.

“This is a good indication that sustained loan growth has not come at the expense of credit quality,” he said.

The latest bad loan ratio is a deceleration from the 2.17 percent recorded in May and the 2.16 percent in April.

The reduction in the NPL ratio came as bank lending remained robust in June, rising by 20.1 percent from year-ago levels.

NPLs are obligations that remain unpaid for at least 30 days after the due date. The NPL ratio pertain to the amount of bad loans over the total loan portfolio.

Central bank data showed that soured loans of banks slid to P94.798 billion in June from the P96.069 billion in May. Big banks’ total loan portfolio, meanwhile, climbed to P4.513 trillion in June from P4.428 trillion in May.

At the same time, universal and commercial banks continued to set aside a higher amount of loan loss reserves versus their actual bad loans. The level went up to 140.63 percent in June from 138.29 percent in May.

Provisioning for NPLs is a prudential measure meant to mitigate against any potential credit losses, the central bank said. 

The BSP monitors the loan quality of banks to maintain high credit underwriting standards, which is essential for keeping financial stability.

Aside from low NPL levels, the banking sector boasts of a P10.28-trillion asset base as of June, reflecting banks’ strong and sound state. Central bank data also showed the banking system’s total loan portfolio amounted to P5.21 trillion, while deposit liabilities summed up to P7.9 trillion.