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Commercial Banking Systems' NPL

12.20.1999

The non-performing loan (NPL) ratio of the commercial banking system as of October 1999 increased to 14.50 percent of total loan portfolio (TLP) from 13.40 percent in September 1999.  The increase was brought about by the 4.3 percent monthly rise in NPLs which was accentuated by the 3.6 percent drop in loan levels (including interbank loan).  NPL and TLP in October 1999 stood at P217.6 billion and P1,500.4 billion, respectively.

Commercial banks’ loan loss reserves (LLRs) rose to P78.2 billion from P76.2 billion last month but coverage ratio (LLR divided by NPL) marginally declined to 35.9 percent from 36.5 percent as the rise in NPLs outmatched the 2.6 percent increment in LLRs.

Overall asset quality also showed some weakening as both NPL and holdings of real and other property owned and acquired (ROPOA) increased while levels of total assets receded pushing up ratio of non-performing assets (NPL plus net ROPOA) to total assets to 11.5 percent from 10.8 percent last month.

Despite the somewhat disappointing results in October, loan and asset quality of the Philippine commercial banking system remained significantly better than in Asian crisis countries. Moreover, in the coming months the BSP continues to believe, based on internal projections, that NPL will remain generally stable at the 13-14 percent range and may even drop below 13 percent in December.

“We are satisfied that the asset quality situation of the commercial banking system remains very manageable. The BSP will nevertheless continue to protect the banking system by strictly enforcing loan loss provisioning requirements. The key to a return to single-digit NPL levels, however, is a robust and sustained economic recovery,” BSP Governor Rafael Buenaventura said.

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