Banks' NPL-to-total loans ratio reaches record low
By Michelle V. Remo
Philippine Daily Inquirer
4:15 am | Friday, October 26th, 2012
The country's big banks kept their exposure to bad debts at a record low
in August even as they extended more loans to individual and corporate
borrowers.
According to the Bangko Sentral ng Pilipinas, the "comfortable" ratio of
non-performing loans (NPL) was one of the indications that the banking
sector remained healthy and relatively unharmed by the crisis
confronting financial institutions in the eurozone.
Based on data from the BSP, universal and commercial banks' NPL
ratio—the proportion of bad debts to their total loan portfolio—stood at
a historic low of 2.08 percent in August.
The latest ratio was unchanged from the previous month, but was even
lower than the already comfortable 2.52 percent recorded in August last
year.
Regulators said banks are encouraged to lend more to help fuel faster
growth of the economy, but at the same time required to keep their
exposure to bad debts within manageable levels.
Bank loans become "bad debts" or are defined as "non-performing" when
these remain unpaid for a specified period of time.
Data further showed that outstanding loans of universal and commercial
banks amounted to P3.38 trillion by the end of August, up by about 10
percent from P3.06 trillion as of the same period last year.
Industry players said the increase in the loan portfolios of banks
proved that there is appetite for lending, especially since banks are
currently enjoying significant levels of liquidity.
Of the outstanding loans as of end-August, some P70.43 billion was
classified as non-performing. This was down year on year by nearly 5
percent from P76.96 billion.
Central bank officials said the decline in NPLs showed that banks were
keeping prudent credit standards even as they move to lend out more to
clients.
Officials said credit growth in the banking system partly aided the
economy's favorable performance in the first semester, when it grew by
an above-target 6.1 percent.
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