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Updates on the NPL Ratio of Universal and Commercial Banks


As of end-August 2005, the non-performing loan (NPL) ratio of universal and commercial banks’ (U/KBs) improved to 9.40 percent from 9.54 percent last month.  This month’s ratio was also better by 4.46 percentage points than the 13.86 percent ratio a year ago. 

This month’s ratio resulted from the 0.7 percent decline in NPLs following banks’ continued efforts to dispose problem loans (e.g., bulk sale or auction), and the 0.8 percent growth in total loan portfolio (TLP).  Total NPLs stood at P173.69 billion from P174.98 billion at end-July 2005, while the industry’s loan portfolio was reported at P1,848.05 billion from the previous month’s P1,834.25 billion.          

Net of interbank loans, the NPL ratio also favorably declined to 11.16 percent from last month’s 11.34 percent and year ago’s 16.54 percent.  The month-on-month development came from the 0.7 percent reduction in NPLs, accompanied by the 0.8 percent expansion in regular lending. 

The ratio of restructured loans (RLs) to TLP likewise dropped to 5.93 percent from 6.23 percent last month as total RLs went down by 4.2 percent to P110.24 billion.  Meanwhile, non-performing RLs rose by 3.1 percent and brought its ratio to total RLs higher by 3.35 percentage points to 46.73 percent. 

The ratio of real and other properties owned or acquired (ROPOA), gross to gross assets (GAs) ratio moved up to 5.02 percent from last month’s 4.93 percent.  This transpired as the 1.8 percent growth in ROPOA, gross outpaced the 0.1 percent expansion in GAs 

Strongly influenced by the rise in foreclosed properties, the industry’s non-performing assets (NPA) ratio slightly went up to 9.16 percent from 9.11 percent last month.  Nonetheless, this was 3.15 percentage points better than year ago’s 12.31 percent ratio.  The 0.05 percentage point hike in this month’s ratio was due to the faster rate of climb in NPAs (0.6 percent) than in GAs (0.1 percent).  As of end-August 2005, total NPAs stood at P365.44 billion from P363.15 billion last month.   

The NPL coverage ratio settled to 72.45 percent from the previous month’s 72.68 percent ratio as the 1.0 percent contraction in loan loss reserves outpaced the 0.7 percent cut in NPLs.  Nevertheless, this month’s ratio continued to be far better by 19.71 percentage points than year ago’s 52.74 percent ratio.  Likewise, the NPA coverage ratio trimmed to 39.42 percent from last month’s 39.99 percent ratio as the 0.8 percent decline in NPA reserves was accompanied by the 0.6 percent rise in NPAs.  From end-August 2004’s 32.47 percent ratio, this month’s NPA coverage ratio was still better by 6.95 percentage points.  Loan loss reserves at end-August 2005 stood at P125.84 billion while the NPA reserves were reported at P144.04 billion.

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