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Updates on NPL Ratio of Universal and Commercial Banks


Universal and commercial banks’ (U/KBs) overall loan quality improved after a substantial sale to a special purpose vehicle (SPV) was completed in March 2005. 

At the end of the first quarter this year, the industry’s non-performing loans (NPL) ratio improved further by 0.49 percentage point to 11.30 percent from the previous month’s 11.79 percent ratio.  This came about from the simultaneous 3.3 percent decline in NPLs and the 0.8 percent growth in total loan portfolio (TLP).  Year-on-year, this month’s ratio also stood better by 2.60 percentage points from year ago’s 13.90 percent ratio. 

The substantial reduction in NPLs was on account of the P10.56 billion worth of problem loans sold to an SPV. 

Net of interbank loans, the NPL ratio also improved at 13.49 percent from last month’s 14.08 percent and year ago’s 17.02 percent ratio. 

The ratio of restructured loans (RLs) to TLP likewise fell to 6.51 percent from 7.17 percent last month as the industry’s RLs contracted by 8.4 percent.  Meanwhile, total non-performing RLs fell by 11.2 percent, favorably bringing the non-performing RLs to total RLs ratio down by 1.53 percentage points to 48.38 percent . 

The ratio of real and other properties owned or acquired (ROPOA), gross to gross assets (GAs) declined to 5.11 percent from the previous month’s 5.19 percent. This transpired as the P1.77 billion sales to SPVs helped bring ROPOA, gross down by 0.2 percent to P203.63 billion.  

Following the decline in NPLs and ROPOA, the industry’s non-performing assets (NPA) ratio improved to 10.12 percent from 10.45 percent last month and 12.56 percent last year.  As of end-March 2005, total NPAs stood at P402.52 billion after a total of P12.33 billion of NPAs were transferred to SPVs.  As of 20 May 2005, total NPAs approved for sale under the SPV Act of 2002 amounted to P57.21 billion, of which P44.16 billion were bulk sales to SPVs.

This month’s NPL coverage ratio strengthened further to 64.66 percent (vs. 64.15 percent last month and 52.39 percent last year) as a result of the faster rate of decline in NPLs (3.3 percent) than LLRs (2.6 percent).  Conversely, the contraction in NPA reserves (2.2 percent) had not kept pace with that of NPAs (1.8 percent), resulting to a 0.14 percentage point drop in the NPA coverage ratio to 37.39 percent from end-February’s 37.53 percent.  Nonetheless, this month’s ratio is still 5.16 percentage points better compared with the previous year’s 32.23 percent ratio.  As of end-March 2005, loan loss reserves stood at P133.97 billion while the NPA reserves were reported at P150.51 billion.

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