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Universal and Commercial Banks' NPL Ratio Improves to 7.22 Percent

08.11.2006

The non-performing loan (NPL) ratio of universal and commercial banks (U/KBs) continued its downtrend with a 0.14 percentage point improvement to 7.22 percent as of end-June 2006 from 7.36 percent the previous month.  Year-on-year, this month’s ratio was also considerably better by 1.99 percentage points from the base figure of 9.21 percent ratio.

The sustained improvement in NPL ratio was driven by the 3.28 percent contraction in NPLs, surpassing the 1.38 percent decline in total loan portfolio (TLP).  At end-June 2006, U/KBs’ NPLs were down by P4.62 billion to P136.51 billion on account of the rise in loans exempted from  non-performing classification under BSP Circular No. 351 (P0.58 billion), NPL sales (P0.13 billion), write-offs and loan settlements.  Simultaneously, TLP shrunk to P1,890.54 billion from last month’s figure of P1,917.06 billion driven mainly by the P24.24 billion reduction in regular loans.

Exclusive of interbank loans (IBL), the industry’s NPL ratio likewise got better to 8.71 percent from the previous month’s 8.87 percent and year ago’s 11.00 percent.

Meanwhile, the restructured loans (RLs) to TLP ratio barely moved at 5.11 percent from last month’s 5.10 percent with a slower drop in total RLs (1.18 percent) than TLP.  Following the same trend, the non-performing RLs to total RLs ratio inched up to 46.72 percent from last month’s 46.71 percent as the contraction in total RLs outpaced the decline in non-performing RLs.

The ratio of real and other properties owned or acquired (ROPOA), gross to gross assets (GA) favorably slid to 4.61 percent from last month’s 4.71 percent.  This developed with a faster 2.15 percent expansion in GAs than the measly 0.03 percent rise in ROPOA.

U/KBs’ non-performing asset (NPA) ratio improved to 7.69 percent from the previous month’s 7.97 percent.  This transpired as the 1.48 percent decrease in NPAs was accompanied by the growth in GAs.  Year-on-year, this month’s figure was comparatively better by 1.30 percentage points from year ago’s 8.99 percent ratio.  As of end-June 2006, the industry’s NPAs amounted to P319.27 billion.

The NPL and NPA coverage ratios exhibited stronger movements at 80.96 percent (up from 77.63 percent) and 40.96 percent (up from 40.15 percent), respectively.  These positive developments came from the expansion in loan loss reserves (LLRs) and NPA cover by 0.88 percent and 0.51 percent, respectively, complemented by the 3.28 percent drop in NPLs and 1.48 percent decline in NPAs.  As of end-June 2006, total LLRs amounted to P110.52 billion while NPA reserves stood at P130.77 billion.  

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