The gross non-performing loans (NPLs) of universal and commercial banks (U/KBs) declined between April 2013 and April 2014. The decline amounts to Php 6.19 billion from the year-ago balance of Php 100.61 billion.
The decline in NPLs contrasts with the increase in lending over the same period. Total loan portfolio (TLP) rose by 19.2 percent from Php 3.67 trillion in April 2013 to Php 4.37 trillion a year after.
The rising TLP and falling NPL have subsequently caused the NPL ratio to decline to 2.16 percent. In comparison, the ratio was 2.74 percent in April 2013.
As a prudential banking measure, the U/KBs also set aside loan loss reserves equivalent to 139.58 percent of their gross NPLs in April, up from the 128.63 percent recorded a year ago.
The Bangko Sentral ng Pilipinas (BSP) also monitors the quality of loans extended by banks according to sectoral borrowers. In April, NPL levels remained low across economic sectors as seen in financial intermediation; real estate, renting and business activities; manufacturing; and wholesale and retail trade. These sectors accounted for 61 percent of the banks’ TLP during the period.
Keeping NPL levels manageable and loan loss provisioning are essential to managing credit risks. These measures are also crucial to achieving the BSP’s objective of fostering the stability of the financial system.