The gross non-performing loans (NPLs) of universal and commercial banks (U/KBs) represented 2.16 percent of the banks’ total loan portfolio (TLP) at end-March this year.
The U/KBs’ gross NPL ratio remained low while TLP increased to Php 4.33 trillion in March from Php 3.63 trillion during the same month in 2013.
Aside from keeping NPL levels low, the banks also continued to set aside robust provisioning for non-performing loans. In March, the U/KBs’ loan loss reserves stood at 141.22 percent of their NPLs, up from the 128.31 percent posted a year earlier. Setting aside reserves for potential losses is a prudential measure for mitigating credit risk.
Likewise, even if the U/KBs’ past due loans are hypothetically treated as NPLs, the banks’ NPL ratio remain manageable at 2.43 percent.
NPLs across economic sectors also remained low. This is evident in U/KBs’ loans to individuals for consumption purposes; real estate activities; financial intermediation; manufacturing; wholesale and retail trade; and electricity, gas and water supply. These sectors accounted for more than 70 percent of the U/KBs’ TLP during the period.
The Bangko Sentral ng Pilipinas (BSP) monitors the loan quality of banks in line with supervisory efforts to foster prudent risk management. This is essential to financial stability, which is a key policy objective of the BSP.