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TBs' NPL Ratio Improves

02.17.2015

The thrift banking industry’s gross non-performing loans (NPLs) accounted for 4.52 percent of its total loan portfolio (TLP) at end-September 2014. With the latest figure, the industry’s NPL ratio sustained a quarter-on-quarter downtrend that began in June 2013.  Gross NPL ratios were 4.83 percent and 5.89 percent at end-June 2014 and at end-September 2013, respectively.

Thrift banks’ (TBs) gross NPL ratio remained low due to a rise in TLP and a decline in gross NPLs. At end-September 2014, the industry’s TLP rose to Php 575.78 billion from Php 562.85 billion a quarter earlier. TBs’ gross NPLs, meanwhile, dropped to Php 26.05 billion in September last year from Php 27.16 billion a quarter earlier.

Aside from keeping NPL levels in check, the industry also maintained substantial reserves for potential credit losses. At the end of the third quarter of 2014, the industry’s loan loss reserves represented 74.38 percent of its gross NPLs, higher than the 70.27 percent posted at end-June last year.

Moreover, TBs’ NPL levels also remained manageable across economic sectors as gleaned from real estate, renting and business activities; loans to individuals for consumption purposes; financial intermediation; wholesale and retail trade; agriculture, hunting, forestry and fishing; other community, social and personal service activities; and manufacturing.

The decline in NPL levels indicate an improvement in the TBs’ loan quality. As bank supervisor, the BSP monitors banks’ loan quality as part of its broader effort to promote sound risk management among banks which is essential to maintaining the stability of the financial system.

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