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Thrift Banks Sustain Single-Digit NPL Ratio


The thrift banking industry posted a non-performing loan (NPL) ratio of 8.68 percent as of end-August 2006. Though higher than the previous month’s 8.38 percent, this month’s NPL ratio was an improvement of 0.16 percentage point over the 8.84 percent ratio registered a year ago. This was attributed mainly to the 6.2 percent increase in NPLs, outpacing the 2.5 percent expansion in total loan portfolio (TLP). Nevertheless, the industry was able to sustain a single-digit NPL ratio for 17 consecutive months now.

  Exclusive of interbank loans (IBL), the industry’s NPL ratio was also higher at 9.65 percent than the previous month’s 9.32 percent and year ago’s 9.38 percent ratios. Compared to NPLs, the growth in TLP (net of IBL) was modest at 2.6 percent. 

 Restructuring activities were reined in. Thus, the proportion of restructured loans (RLs) to TLP dropped to 2.56 percent from 2.61 percent the previous month. However, RLs share to TLP was higher than the 2.35 percent ratio posted a year ago.

Meantime, the ratio of real and other properties acquired (ROPA) over gross assets (GA) eased to 8.52 percent from the previous month’s 8.73 percent. This transpired as the stock of foreclosed assets shrunk by 1.63 percent. Likewise, this month’s ratio is an improvement of 1.74 percentage points from year ago’s 10.26 percent ratio.

The non-performing assets (NPA) ratio inched up to 12.43 percent from the previous month’s 12.40 percent as the buildup in NPAs outpaced the expansion in GAs. Year-on-year, this ratio is 1.54 percentage points better than the base figure of 13.97 percent.

Meanwhile, the industry bolstered reserves against probable losses. NPA reserves went up by 7.9 percent to P13.73 billion. These included the 4.0 percent additional loan loss reserves (LLRs) allocated during the month. Hence, LLRs went up to P10.45 billion from the previous month’s P10.05 billion.

However, the NPL coverage ratio slid to 51.80 percent (vs. 52.89 percent last month) suggesting that the increase in LLRs proved to be inadequate to cushion the higher incidence of NPLs. Nevertheless, the NPL coverage ratio showed marked improvement from the 44.19 percent ratio posted a year ago.

In contrast, the NPA coverage ratio widened to 27.18 percent (vs. 25.49 percent in July). Similarly, this month’s ratio was comparatively stronger than the 19.32 percent ratio posted a year ago.

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