Bad loans hit 7-year high

MANILA, Philippines — Banks continue to grapple with higher bad loans amid the economic fallout caused by the COVID-19 pandemic, the Bangko Sentral ng Pilipinas (BSP) said.

The central bank said the gross non-performing loan (NPL) ratio of the  banking sector rose for the eighth straight month, hitting its highest level in almost seven years at 2.84 percent in August as restructured loans more than doubled and past due loans continued to soar.

This was the highest gross NPL ratio since the 2.87 percent recorded in February 2014. The bad loan ratio of the country’s banking industry has steadily increased since the 2.16 percent logged in January.

According to the BSP, the gross non-performing loans of the banking industry surged by 35 percent to P305 billion in August from P225.9 billion in the same month last year.

NPLs, or bad debts, refer to past due loan accounts where the principal or interest is unpaid for 30 days or more after due date.

On the other hand, the industry’s total loan portfolio inched up by 4.5 percent to P10.75 trillion in August from P10.29 trillion a year ago.

Data from the central bank showed restructured loans soared by 158.7 percent and more than doubled to P104.5 billion in August from last year’s P40.4 billion, resulting in a restructured loan ratio of 0.97 percent.

Likewise, past due loans referring to all types of loans left unsettled beyond payment date jumped by more than 45 percent to P567.84 billion in August from P311.47 billion a year ago for a past due ratio of 5.28 percent.

Local banks sacrificed earnings by reinforcing allowance for credit losses in anticipation of a sharp rise in bad loans. The industry’s provision for loan losses surged by 58 percent to P327.42 billion in August from P207.22 billion in the same month last year.

This translated to a higher NPL coverage ratio of 107.35 percent from 91.73 percent.

The NPL ratio for universal and commercial banks rose further for the eighth consecutive month to 2.37 percent in August from 1.69 percent. This is the highest level since the 2.38 percent booked in November 2013.