Banks offer restructuring amid lockdown

NPL ratio steady at 4.48% in June

MANILA, Philippines — With the absence of new laws offering debt payment holidays, Philippine banks are ready to talk to borrowers severely affected by the COVID-19 pandemic as the National Capital Region and nearby provinces have been placed under hard lockdown due to the more contagious Delta variant.

Jose Teodoro “TG” Limcaoco, president and chief executive officer at Ayala-led Bank of the Philippine Islands (BPI), told members and guests of the Tuesday Club that banks are always ready to extend relief measures to clients, especially amid the global health crisis.

“We always talk to our clients. If clients have problems meeting their obligations and their loans, what we do is we ask them to come in and talk to us so that we can look at it and work something out,” Limcaoco said.

He said lending has been contracting since last year as the industry remains risk-averse and because of the lack of demand from borrowers due to uncertainties brought about by the pandemic.

“I think every bank executive will say this: a bank does not want to foreclose on a loan or declare a loan in default. We really just want to help and restructure. And that’s not just BPI, that’s all banks,” Limcaoco said.

Limcaoco said the 170-year-old bank is willing to work with borrowers in preparation for the recovery of the Philippine economy from the pandemic-induced recession.

“My view here is, this pandemic is like a light switch. Our economy was doing very well up to March 2020. Then someone turned off the lights. My view is, when you turn on the lights, the economy will come back roaring,” he said.

As banks remained risk-averse and demand from borrowers tepid due to uncertainties brought about by the global health crisis, the loan book of Philippine banks declined slightly to P10.77 trillion from P10.82 trillion.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed the gross non-performing loan (NPL) ratio of banks was almost unchanged at 4.48 percent in June after rising for five straight months to hit a 13-year high of 4.49 percent in May as the country continues to struggle.

The asset quality of the industry has been deteriorating as banks have been piling up NPLs or past due loan accounts where the principal or interest is unpaid for 30 days or more after due date as well as bad debts due to the impact of the COVID-19 pandemic.

The soured loans of the banking sector surged by 73.8 percent to P482.99 billion in June from P277.81 billion in the same month last year.

Past due loans, referring to all types of loans left unsettled beyond payment date, jumped by 51.3 percent to P577.06 billion from P381.43 billion for a past due ratio of 5.36 percent.

Likewise, the industry’s restructured loans amounted to P328.65 billion in June or 6.7 times the P48.67 billion booked in the same month last year, translating to a restructured loan ratio of 3.05 percent.

In anticipation of rising defaults due to the impact of the pandemic-induced recession, the banking sector’s allowance for credit losses increased by 31.3 percent to P397.79 billion from P302.93 billion.

This translated to an industry’s NPL coverage ratio of 82.36 percent in June after declining for four straight months after hitting 93.86 percent in January.

On the other hand, the industry’s non-performing assets (NPA) jumped by 53.4 percent to P600.79 billion in end June this year from P391.72 billion in end June last year.