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Updates on the NPL Ratio of Universal and Commercial Banks


As of end-September 2005, the non-performing loan (NPL) ratio of universal and commercial banks’ (U/KBs) was slightly higher by 0.03 percentage point to 9.43 percent from 9.40 percent last month.   Nonetheless, this month’s ratio was still better by 4.47 percentage points than the previous year’s 13.90 percent ratio.

The movement in this month’s ratio was a result of the 2.1 percent contraction in total loan portfolio (TP) which outpaced the 1.8 percent reduction in NPLs. Attributable to banks’ continued efforts to reduce problem loans, total NPLs stood favorably lower at P170.62 billion from P173.69 billion at end-August 2005. Meanwhile, TLP was reported at P1,808.62 billion, down from P1,848.05 billion. 

Net of interbank loans, the NPL ratio also went up to 11.34 percent from last month’s 11.16 percent.  This developed as the 3.3 percent decline in regular lending overtook the drop in NPLs. Year-on-year, however, this month’s ratio was still favorably lower by 5.35 percentage points.

The ratio of restructured loans (RLs) to TLP likewise rose to 5.95 percent from month ago’s 5.93 percent as the reduction in TLP more than offset the 1.7 percent decrease in RLs.  Meanwhile, non-performing RLs fell at an even faster rate of 3.4 percent, influencing the favorable cutback in the non-performing RLs to total RLs ratio by 0.80 percentage point to 45.93 percent.   As of the end of the 3rd quarter of 2005, total RLs and non-performing RLs were at P108.32 billion and P49.75 billion, respectively.

 The ratio of real and other properties owned or acquired (ROPOA), gross to gross assets (GAs) increased to 5.07 percent from last month’s 5.02 percent.   This transpired as the 1.3 percent contraction in the industry’s gross assets (GAs) overshadowed the 0.3 percent reduction in ROPOA, gross. 

Notwithstanding the declines in NPLs and ROPOA, the industry’s non-performing asset (NPA) ratio slightly rose by 0.03 percentage point to 9.19 percent from 9.16 percent last month.  The increase was due to the faster drop in GAs (1.3 percent) than in NPAs (1.0 percent).  Still, this month’s ratio stood 3.08 percentage points better over year ago’s 12.27 percent ratio. As of end-September 2005, total NPAs stood at P361.71 billion from P365.44 billion last month. 

In addition to bank’s efforts to reduce the levels of problem accounts, additional provisions for probable losses were also made during the month, bringing the NPL and NPA coverage ratios stronger at 74.55 percent (from 72.45 percent) and 40.23 percent (from 39.42 percent), respectively. Year-on-year, these ratios also significantly improved from the 52.96 percent NPL coverage ratio and 32.69 percent NPA coverage ratio. Loan loss reserves at end-September 2005 were at P127.20 billion while the NPA reserves were reported at P145.53 billion.

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