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Updates on NPL Ratio of Universal and Commercial Banks

06.30.2005

Universal and commercial banks’ (U/KBs) overall loan quality continued to improve after 2 more bulk sales to special purpose vehicles (SPVs) were completed in April 2005. 

As of end-April 2005, the industry’s non-performing loans (NPL) ratio improved further by 0.08 percentage point to 11.22 percent from the previous month’s 11.30 percent ratio.  This transpired as total NPLs fell at a faster rate of 1.6 percent than the 0.9 percent drop in total loan portfolio (TLP).  Year-on-year, this month’s ratio also stood better by 2.36 percentage points from year ago’s 13.58 percent ratio. 

The P3.32 billion cut in NPLs was mostly on account of the P2.82 billion worth of problem loans sold to SPVs. 

Net of interbank loans, the NPL ratio also improved at 13.27 percent from last month’s 13.49 percent and year ago’s 16.57 percent. 

The ratio of restructured loans (RLs) to TLP on the other hand slightly increased to 6.58 percent from 6.51 percent last month as the 0.1 percent rise in RLs was complemented by the 0.9 percent reduction in TLP.  Meanwhile, total non-performing RLs slid by 0.3 percent, favorably reducing the non-performing RLs to total RLs ratio by 0.19 percentage point to 48.19 percent. 

The real and other properties owned or acquired (ROPOA), gross to gross assets (GAs) ratio declined to 5.05 percent from the previous month’s 5.11 percent. This transpired as the P4.03 billion bulk sale to an SPV helped bring ROPOA, gross down by 2.2 percent to P199.21 billion. 

As a result of the decline in NPLs and ROPOA, the industry’s non-performing assets (NPA) ratio improved further to 10.03 percent from 10.12 percent last month and 12.39 percent last year.  As of end-April 2005, total NPAs stood at P394.57 billion after a total of P6.85 billion of NPAs were transferred to SPVs.  As of 31 May 2005, total NPAs approved for sale under the SPV Act of 2002 amounted to P58.87 billion, of which P45.12 billion were bulk sales to SPVs. 

This month’s NPL coverage ratio slid to 64.47 percent from the previous month’s 64.66 percent ratio as a result of the faster rate of decline in LLRs (1.9 percent) than NPLs (1.6 percent).  Compared against the 53.16 percent ratio last year, this month’s ratio is still better by 11.31 percentage points.  Meanwhile, the NPA coverage ratio strengthened further by 0.45 percentage point over the month following the higher rate of decline in NPAs (2.0 percent) than NPA reserves (0.8 percent).  As of end-April 2005, the NPA coverage ratio was reported at 37.84 percent, higher from last month’s ratio of 37.39 percent and last year’s 32.54 percent.  Loan loss reserves at end-April 2005 stood at P131.43 billion while the NPA reserves were reported at P149.30 billion.

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