The vigorous efforts of the thrift banking industry to reduce holdings of bad loans continued to pay off as its NPL ratio further declined to 14.2 percent as of end-November 1999 from 16.4 percent last month and 18.0 percent a year ago. The industry’s recovery was attributable to the significant contraction in volume of NPL, which dropped by 11.6 percent to P19.1 billion from P21.6 billion a month ago. This was reinforced by the 2.0 percent growth in total loan portfolio to P134.9 billion from P132.0 billion a month ago.
The sharp drop in NPLs also counterbalanced the P1.1 billion or 6.0 percent month-on-month rise in ROPOA-net. As a result, total NPAs were trimmed by 3.5 percent from P40.0 billion to P38.6 billion. This improvement, along with the 2.1 percent growth in total assets from P211.6 billion a month ago to P216.0 billion further bolstered overall asset quality of thrift bank as the ratio of non-performing assets (NPAs) i.e., NPLs and Real and Other Properties Owned and Acquired (ROPOA)-net, dropped to 17.9 percent to total assets from 18.9 percent a month ago.
Provisions for loan losses also continued to increase despite the lowering of NPLs as banks continued in their efforts to strengthen their financial profiles. Consequently, the coverage ratio (loan loss reserves to NPL) rose sharply to 42.3 percent from 37.4 percent.
All three industry sub-groups i.e., Savings Mortgage Banks (36 banks), Private Development Banks (41 banks) and Stocks Savings and Loan Associations (42 banks), posted simultaneous improvements in asset quality during the period. Moreover, the generally good asset quality position of the large majority of thrift banks was weighed down by a handful of problem thrift banks. Excluding these banks would significantly boost the industry’s NPL ratio to a single-digit ratio of 9.3 percent and the coverage ratio to 59.6 percent.