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Update on NPL Ratio of Universal and Commercial Banks


As of end-May 2005, the non-performing loan (NPL) ratio of universal and commercial banks’ (U/KBs) continued to improve, declining by 0.29 percentage point to 10.95 percent from the previous month’s 11.24 percent.  This transpired as the industry’s total loan portfolio (TLP) grew by 2.7 percent while total NPLs barely moved at P204.35 billion from P204.32 billion.  Year-on-year, this month’s ratio also stood better by 2.58 percentage points from year ago’s 13.53 percent ratio. 

Over the month, 2 bulk sales of NPLs to SPVs totaling P2.50 billion (P0.89 billion of which was already taken out from banks’ books in the prior periods) were completed while another bank wrote-off P0.92 billion worth of NPLs, relieving the industry of P3.42 billion of problem loans.  These however were matched by the growth in the NPLs of other banks. 

Net of interbank loans, the NPL ratio also improved to 12.84 percent from last month’s 13.30 percent and year ago’s 16.53 percent.  The favorable month-on-month change was due to the 3.7 percent increase in regular lending that outpaced the very negligible rise in NPLs. 

The ratio of restructured loans (RLs) to TLP went down to 6.45 percent from 6.58 percent last month as the 2.7 percent rise in TLP outmatched the 0.7 percent climb in RLs.  Meanwhile, total non-performing RLs grew by 2.0 percent, bringing the non-performing RLs to total RLs ratio up by 0.61 percentage point to 48.80 percent. 

The real and other properties owned or acquired (ROPOA), gross to gross assets (GAs) ratio declined further to 4.94 percent from last month’s 5.05 percent. This transpired as the P1.53 billion bulk sale to an SPV helped bring ROPOA, gross down by 1.0 percent to P197.24 billion.  

As a result of the decline in NPLs and ROPOA, the industry’s non-performing assets (NPA) ratio improved further to 9.86 percent (back to a single-digit ratio for the first time since 1998) from 10.04 percent last month and 12.24 percent last year.  As of end-May 2005, total NPAs stood at P393.02 billion after a total of P4.03 billion of NPAs was sold to SPVs.  As of 31 May 2005, total NPAs approved for sale under the SPV Act of 2002 amounted to P58.87 billion, of which P45.12 billion were bulk sales to SPVs.

This month’s NPL coverage ratio slid to 64.21 percent from the previous month’s 64.33 percent ratio as a result of 0.2 percent decline in LLRs.  Compared against the 53.39 percent ratio last year, this month’s ratio is still significantly better by 10.82 percentage points.  Meanwhile, the NPA coverage ratio strengthened further to 37.97 percent from last month’s 37.79 percent ratio as total NPAs declined (0.5 percent) faster than NPA reserves (0.1 percent).  Year-on-year, this month’s NPA coverage ratio was also higher by 5.34 percentage points (from 32.63 percent).  Loan loss reserves at end-May 2005 stood at P131.21 billion while the NPA reserves were reported at P149.22 billion.

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