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U/KBs' NPL Ratio Eases to 2.80 Percent

07.22.2011

As of end-May 2011, the non-performing loans (NPL) ratio of universal and commercial banks (U/KBs) improved to 2.80 percent, lower by 0.15 percentage point from last month's 2.95 percent and by 0.51 percentage point from year ago's 3.31 percent ratio. This is the fourth consecutive month that the NPL ratio has been below three percent.  This ratio matches the end-December 1996 ratio, which is the lowest NPL ratio prior to the 1997 Asian Crisis.

Month-on-month, the end-May 2011 ratio eased due to the combined effect of the 1.83 percent decline in NPLs and the 3.48 percent expansion in total loan portfolio (TLP). U/KBs' NPLs tapered to P81.91 billion from P83.44 billion while TLP grew to P2,929.03 billion from P2,830.50 billion.

Net of interbank loans, the NPL ratio also went down to 2.99 percent from last month's 3.16 percent and year ago's 3.70 percent ratio. On a month-on-month comparison, the ratio declined as the reduction in NPLs was complemented by the 3.49 percent increase in regular loans to P2,735.20 billion from P2,642.91 billion last month.

The restructured loans (RLs) to TLP ratio fell to 1.39 percent from last month's 1.48 percent and year ago's 1.63 percent ratio. The month-on-month decline in the ratio was due to the expansion of TLP combined with the 2.48 percent tapering of gross RLs to P41.16 billion.

Meantime, the real and other properties acquired (ROPA) to gross assets (GA) ratio stood at 1.99 percent, slightly higher than last month's 1.98 percent yet still better than year ago's 2.29 percent ratio. The slight increase in the ratio from last month was due to the 2.07 percent increase in ROPA to P124.45 billion which outpaced the 1.48 percent increment in GAs. 

  The non-performing assets (NPA) to GAs ratio improved to 3.31 percent from last month's 3.35 percent and year ago's 3.79 percent ratio. The decline in the ratio from last month was mainly due to the 1.48 percent increase in GAs, which was faster than the 0.48 percent rise in NPAs to P206.36 billion from last month's P205.37 billion.

The industry provided adequate provisioning against potential credit losses.  The NPL coverage ratio strengthened to 123.31 percent from last month's 121.06 percent and year ago's 110.17 percent. However, the NPA coverage ratio (NPA reserves to NPAs) slightly narrowed to 62.54 percent from last month's 62.88 percent but widened from year ago's 56.70 percent ratio.

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