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Thrift Banks' NPL Ratio Eases to 6.39% in May

09.12.2008

As of end-May 2008, the thrift banking industry’s non-performing loans (NPL) ratio stood at 6.39 percent, easing by 0.09 percentage point from last month’s 6.48 percent and by 1.41 percentage points from year ago’s 7.80 percent ratio. The improvement from last month was due to the faster 2.65 percent expansion in total loan portfolio (TLP) compared to the 1.13 percent buildup in NPLs.

All in all, the industry was able to sustain a single-digit NPL ratio for the past 38 months; and pinned it below the pre-crisis ratio of 7.74 percent (as of end-June 1997) for the past 11 months.

Exclusive of interbank loans (IBL), the industry’s NPL ratio at 7.65 percent likewise improved from last month’s 7.67 percent as core lending expanded by 1.38 percent to P266.39 billion. This month’s ratio is also better than year ago’s 8.87 percent ratio.
 
Restructured loans went up by 1.23 percent to P4.67 billion in May. Yet, the proportion of RLs to TLP went down to 1.46 percent from last month’s 1.48 percent due to the faster expansion of TLP.

The ratio of real and other properties acquired (ROPA) over gross assets (GA) slipped to 5.25 percent from last month’s 5.33 percent. This occurred as ROPA slid by 0.20 percent to P27.01 billion. Similarly, this month’s ratio was better by 2.44 percentage points from year ago’s 7.69 percent ratio.

The non-performing assets (NPA) ratio improved to 9.24 percent from last month’s 9.32 percent as the 1.31 percent growth in GAs stifled the 0.37 percent increment in NPAs to P47.39 billion. Year-on-year, this month’s ratio is 2.07 percentage points better than the reference ratio of 11.31 percent.

Meanwhile, the NPL coverage ratio tapered to 48.73 percent, or by 0.30 percentage point from 49.03 percent last month. This transpired as loan loss reserves (LLRs) edged by only 0.51 percent to P9.93 billion. Also, this month’s ratio paled in comparison with the 51.79 percent ratio posted a year ago.

The NPA coverage ratio, on the other hand, widened to 27.22 percent (from 27.11 percent in April) due to the 0.75 percent enhancement in NPA reserves to P12.90 billion. In the same way, this month’s ratio was comparatively wider than year ago’s 26.32 percent ratio.

On the whole, the general improvement in thrift banks’ loan and asset quality metrics was driven by continuous asset disposals through Special Purpose Vehicle (SPV)–related transactions and other alternative modes of asset cleanup such as Joint Venture Agreements and public auctions.

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