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Thrift Banks' NPL Ratio Remains Single-Digit

09.26.2006

The thrift banking industry posted a non-performing loan (NPL) ratio of 8.38 percent as of end-July 2006. Though slightly higher than the previous month’s 8.27 percent, this month’s NPL ratio was an improvement of 0.31 percentage point over the 8.69 percent ratio registered a year ago. This was attributed mainly to the 5.6 percent increase in NPLs, outpacing the 4.2 percent hike in total loan portfolio (TLP). Nevertheless, the industry was able to sustain a single-digit NPL ratio for 16 consecutive months now.

  Exclusive of interbank loans (IBL), the industry’s NPL ratio was also higher at 9.32 percent than the previous month’s 9.02 percent and the year ago’s 9.29 percent ratios. Compared to NPLs, the growth in TLP (net of IBL) was modest at 2.2 percent. 

 Restructuring activities slowed down in July. Thus, the proportion of restructured loans (RLs) to TLP dropped to 2.61 percent from 2.69 percent the previous month. However, RLs share to TLP was higher than the 2.28 percent ratio posted a year ago.

Meantime, the ratio of real and other properties acquired (ROPA) over gross assets (GA) climbed to 8.73 percent from the previous month’s 8.44 percent. This was driven by the quicker rate of foreclosure of assets versus the expansion in GAs. However, this month’s ratio is an improvement of 1.40 percentage points from year ago’s 10.13 percent ratio.

The non-performing assets (NPA) ratio rose to 12.40 percent from the previous month’s 11.98 percent.  This transpired as the rise in NPAs outrun the expansion in GAs. Year-on-year, this ratio is 1.58 percentage points better than the base figure of 13.98 percent.

Meanwhile, the industry bolstered reserves against probable losses. NPA reserves went up by 9.0 percent to P12.73 billion. These included the 8.3 percent additional loan loss reserves (LLRs) allocated during the month. Hence, LLRs went up to P10.05 billion from the previous month’s P9.28 billion.

Consequently, the NPL coverage ratio strengthened to 52.89 percent (vs. 51.58 percent last month). The NPL coverage ratio also showed marked improvement from the 42.92 percent ratio posted a year ago.

By the same token, the NPA coverage ratio widened to 25.49 percent (vs. 25.17 percent in June). Likewise, this month’s ratio was comparatively stronger than the 19.16 percent ratio posted a year ago.

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