Banks’ NPL ratio improves to 1.82% in Dec

MANILA, Philippines - The exposure of the country’s universal and commercial banks to bad debt fell to a historic low at the end of December last year, an indication that the banking industry remained healthy despite problems besetting financial institutions in the eurozone.

The Bangko Sentral ng Pilipinas reported yesterday that the average non-performing loans ratio of the country’s big banks settled at only 1.82 percent last year , the lowest level ever recorded in years since the 1997 Asian crisis.

The nonperforming loan ratio is the proportion of bad debts to the outstanding loans of banks. A loan becomes a bad debt if it remains unpaid at least 30 days after maturity.

The banks’ soured loans fell to P93.06 billion as of the end of 2014 from P95.52 billion in November last year.

The big banks’ total loan portfolio, on the other hand, rose to P5.12 trillion last December from P4.83 trillion.

Apart from keeping the NPL ratio low,  universal and commercial banks continue to beef up reserves for potential credit losses.

The industry’s loan loss reserves represented 142.43 percent of its NPLs, up from 140.91 percent a month earlier.

Gross NPL levels across economic sectors remained manageable as in seen in financial intermediation, real estate, manufacturing, retail, and utilities.  These industries received 72.4 percent of the banks’ total loan portfolio at the end of 2014.

The BSP monitors the quality of bank loans as part of efforts to strengthen the industry.