Universal and commercial banks (U/KBs) continue to post good loan quality as reflected in their low non-performing loans (NPL) ratio and other credit risk indicators.
The Bangko Sentral ng Pilipinas (BSP) reported that the NPL ratio of U/KBs was 1.87 percent of their P3.62 trillion total loan portfolio at end-2012, lower than the industry’s 2.23 percent NPL ratio a year earlier. The end-2012 figure is the lowest that the industry posted since the 1997 Asian financial crisis.
The industry’s NPL coverage ratio (loan loss reserves to NPLs) also rose to 141.25 percent in December 2012 from 126.36 percent last year. BSP notes that the industry has provisioned for more than 100 percent of its NPLs as a pro-cyclical safety net.
Combined with the strengthening of the NPL coverage ratio, the industry’s credit risk remains well-contained amid the current low-interest market environment and growing domestic economy.
The improving loan quality, along with the declining levels of real and other properties acquired and restructured loans, contributed to the improvement of the overall asset quality of the industry.
The financial intermediation, real estate and manufacturing sectors were the biggest recipients of U/KB loans. Each of the 3 sectors accounted for more than 15 percent of the industry’s exposure.
In line with its role of promoting Financial Stability (FS), BSP continues to monitor the quality and soundness of banks’ loan portfolio. Keeping credit standards at high levels, which is essential to mitigating risks in the industry, is a key policy objective for BSP.