Bad Loans Rate Unchanged in August – Manila Bulletin

The banks’ non-performing loans (NPL) ratio remained unchanged in August at 4.51 percent compared to July, the Bangko Sentral ng Pilipinas (BSP) reported.

The total number of bad loans reached pesos 491.93 billion in August, or 61.28 percent, compared to pesos 304.99 billion in the same month last year.

Compared to the previous month, leavened loans rose slightly by one percent in August, or from pesos 487.05 billion in July, GNP data showed.

The NPL rate was now 2.84 percent higher than in the same period of the previous year. NPLs are unpaid and impaired credit accounts for more than 30 days.

Major Philippine banks still have sufficient capital despite the pandemic

The total loan portfolio in August of 10.89 trillion pesos was 1.4 percent higher than the same period in 2020 of 10.75 trillion pesos.

The overdue rate or default rate was 5.32 percent in August, slightly higher than in July of 5.31 percent. Overdue loans (PDL) amounted to 579.60 billion pesos, two percent more than 567.84 billion pesos a year ago. These are loans whose repayment / interest / installment is unpaid beyond the due date.

The banks’ NPL coverage ratio improved further to 83.52 percent from 82.44 percent in the previous month.

The banks set up pesos 410.85 billion for loan losses in the total loan portfolio during the reporting period. The credit risk reserves for the entire loan portfolio rose to 3.77 percent in August from 3.72 percent in July.

The last time the NPL rate was near the 4.51 percent mark was in June 2008 at 4.49 percent and in September of the same year at 4.52 percent.

GNP Governor Benjamin E. Diokno said last week that the NPL rate is expected to peak at 8.2 percent in 2022. By the end of this year, the rate of non-performing loans will also exceed the six percent mark.

Diokno said, however, that the NPL rate will remain in the single digits and will not reach the level reached during the 1997 Asian financial crisis, when the NPL rate peaked at 18 percent.

Diokno is confident that the NPL ratio will and will remain in the single digits due to the prudent credit risk management standards of local banks and the operationalization of the Financial Institutions Strategic Transfer (FIST) Act, which will help banks dispose of distressed assets to reduce.

He said some banks have already expressed an interest in divesting their NPAs under the FIST Act, which could further reduce the NPL ratio by 0.6 to 5.8 percentage points over a four-year period.



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