Banks’ NPL ratio down to 3.17% in December

MANILA, Philippines — The soured loans of Philippine banks continued to ease in December last year, hitting the lowest level in more than two years, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the BSP showed the banking industry’s NPL ratio improved further to 3.17 percent in December from 3.35 percent in November last year, the lowest since the 2.84 percent recorded in August 2020.

The share of bad debts to the total loans disbursed by banks has been easing since March last year amid the further reopening of the economy.

As the economy struggled due to the impact of the pandemic, the NPL ratio of Philippine banks peaked at 4.51 percent in July and August 2021.

The industry’s soured loans slipped by 5.7 percent to P399.54 billion in end-2022 from P452.45 billion in end-2021, while loans disbursed by banks booked a double-digit growth of 10.7 percent to P12.61 trillion from P11.39 trillion as the economy further reopened.

Likewise, the banking sector’s past due loans declined by 9.4 percent to P478.79 billion from P528.27 billion, while restructured loans retreated by 7.4 percent to P330.11 billion from P356.66 billion.

Meanwhile, Philippine banks reported that loan loss reserves went up by 7.6 percent to P426.86 billion in end-December last year from P396.82 billion in end- December 2021.

This translated to a loan loss reserve level of 3.38 percent and an NPL coverage ratio of 106.84 percent.

The BSP earlier projected that the NPL ratio of Philippine banks would accelerate and peak at 8.2 percent in 2022.

The BSP increased key policy rates by 350 basis points last year, bringing the benchmark rate to a 14-year high of 5.50 percent from an all-time low of two percent, to fight inflation and smoothen volatility in the foreign exchange market amid the aggressive rate hikes by the US Federal Reserve.

The BSP is expected to deliver a higher increase this month as inflation blew past expectations to hit a fresh 14-year high of 8.7 percent in January from 8.1 percent in December.