Rural, coop banks improve bad loans ratio

MANILA, Philippines – The non-performing loan ratio of rural and cooperative banks improved in the third quarter of last year after sliding to its lowest level in two years, prompting banks to jack up their loan loss reserves, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The central bank said the gross non-performing loans (NPL) of rural and cooperative banks improved to 11.53 percent of the banks’ total loan portfolio as of end-September last year from 11.9 percent in end-June last year and from 12.24 percent in end-September 2014.

Data from the BSP showed soured loans of rural and cooperative banks slipped 1.75 percent to P14 billion in end-September from P14.25 billion in end-June last year.

On the other hand, the total loan portfolio of rural and cooperative banks inched up 1.4 percent to P121.42 billion from P119.78 billion.

The top borrowers of the banks across economic sectors were agriculture, forestry, and fishing; wholesale and retail trade; and loans to individuals for consumption purposes representing 60 percent of the banks’ total loan portfolio at end-September last year.

To mitigate credit risks, the banks also set aside higher loan loss reserves amounting to P9.2 billion or 65.7 percent of their gross NPLs at end-September last year from P8.91 billion or 62.51 percent of their gross NPLs at end-June last year.

“The latest NPL figures indicate the banks’ continued efforts to adhere to sound credit risk management principles and to maintain loan quality,” the BSP said

In line with its Financial Stability agenda, the BSP said it would continue to monitor the loan quality of banks as part of ts broader efforts to promote sound credit risk management among these lenders.

“These are essential to sustaining the viability of individual banks and to maintaining the overall stability of the domestic financial system,” it added.