Banks’ bad loans ratio improves to 13.5% in May

The bad loans’ ratio of commercial and universal banks improved slightly at the end of May this year, accounting for 13.55 percent of total loans compared to 15.41 percent last year.

Data from the Bangko Sentral ng Pilipinas (BSP) show that there was a 1.2-percent growth in the sector’s total loan portfolio which outpaced the one-percent growth in non-performing loans (NPL).

The BSP said that out of the 42 commercial and universal banks, 17 banks reported an increase in NPLs amounting to a total of P4.34 billion while 15 banks reported a decline in their NPLs to P1.85 billion. The remaining 10 banks reported no change.

The BSP reported that net of interbank loans, the NPL ratio went down by 1.08 percent from 17.64 percent last year to 16.56 percent this year.

The improvement resulted from the 1.1 percent or P15.89 billion in total loan portfolio net of interbank loans which outgrew the one-percent increase in NPLs.

On the other hand, the BSP said the proportion of real and other properties owned or acquired (ROPOA) to the gross assets of universal and commercial banks fell to 5.65 percent as of end-May from 5.75 percent in April.

The BSP attributed this decline to a P590-million decrease in ROPOA to P206.87 billion complemented by a 1.5-percent or P54.09-billion increase in total assets to P3.663 trillion.

Exclusive of performing sales contract receivables, the BSP said the ROPOA decline was a bit larger, dropping to P200.94 billion from P201.68 billion.

The proportion of restructured loans to the TLP went down slightly to 7.41 percent from 7.43 percent in April. This occurred as the 1.2-percent percent increase in TLP outweighed the P1.29 billion expansion in RLs to P135.70 billion from P134.41 billion over the same comparative periods.

However, the BSP said the ratio of past due RLs to RLs remained high at 41.21 percent in spite of a 0.92 percentage point improvement from April’s ratio of 42.13 percent.

On the other hand, the proportion of non-performing assets (NPA) to the TLP improved to 12.25 percent from 12.39 percent as of end April and from 13.66 percent a year ago.

There have been fears that heavy borrowing by the national government had begun to crowd the private sector out of the credit market but the BSP attributed the decline only to the absence of demand.

The BSP’s statement, however, is belied by the results of its own Business Expectation Survey (BES) in the last quarter where businessmen expressed concern that banks were lending less and less to corporate borrowers.

The latest BSP data however supported the BES survey except the BSP said the decline in bank lending "may be linked to the increase in banks‚ foreclosures (Real and Other Properties Owned and Acquired), spare capacity in manufacturing, and the current political uncertainty in the run up to the May presidential elections."

The BSP said the decline in KB loans to the manufacturing sector was due to the continued presence of spare capacity among firms in the sector, giving room for firms to expand production without necessarily requiring additional capital financed by borrowings from KBs.