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Rural Banks' NPL Ratio Improves to 10.41 Percent


As of end-December 2009, the rural banking system posted a non-performing loans (NPL) ratio of 10.41 percent, easing by 0.17 percentage point from previous quarter’s 10.58 percent. However, this ratio was 0.30 percentage point higher than year ago’s 10.11 percent ratio. 

The quarter-on-quarter improvement came about as NPLs declined by 0.51 percent to P10.16 billion from P10.21 billion last quarter. However, the decline in delinquent loans was followed by the increased restructuring and foreclosure proceedings as both restructured loans and real and other properties acquired (ROPA) simultaneously rose during the quarter. Meantime, the 1.12 percent expansion in total loan portfolio (TLP) to P97.53 billion from P96.45 billion also contributed to the improved NPL ratio in the fourth quarter of 2009.

Based on the three major geographical regions, rural banks in the Mindanao area exhibited better loan quality at 7.49 percent as against rural banks in Luzon and Visayas which registered NPL ratios of 10.80 percent and 15.05 percent, respectively.

The ratio of restructured loans (RLs), gross to TLP, gross rose to 1.06 percent from 0.76 percent last quarter as RLs grew by 41.66 percent to P1.04 billion from P0.73 billion last quarter.

ROPA, gross rose by 1.52 percent to P7.79 billion from previous quarter’s P7.67 billion. However, with the faster expansion in gross assets, the ratio of ROPA to gross assets fell to 4.82 percent from 4.96 percent last quarter.

The non-performing assets (NPA) increased by 0.36 percent to P17.94 billion as the decline in NPLs was offset by the increase in ROPA. With gross assets expanding by 4.55 percent, the NPA ratio of the industry improved to 11.15 percent from 11.62 percent last quarter. Year-on-year, this quarter’s ratio was also better than the reference ratio of 11.68 percent.

The NPL coverage ratio widened to 38.91 percent from 38.74 percent last quarter. The 0.07 percent drop in loan loss reserves to P3.95 billion was complemented by the larger decline in NPLs.

Likewise, the NPA coverage ratio improved by 0.14 percentage point to 24.70 percent from 24.56 percent last quarter. This developed as NPA reserves grew by 0.93 percent to P4.43 billion.  This quarter’s NPA coverage ratio was also better than last year’s 23.21 percent ratio.

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