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U/KBs' NPL Ratio Remains Low Amid Credit Growth

10.02.2015

The gross non-performing loans (NPL) ratio of universal and commercial banks (U/KBs) remained low at 1.90 percent of the banks’ total loan portfolio (TLP) as of end-July this year. The monthly loan quality indicator has been below two percent since November last year.

The latest NPL ratio rose marginally from the 1.84 percent recorded at end-June this year amid a flat growth in the banks’ TLP and a three percent rise in gross NPLs month-on-month.

In July this year, lending by U/KBs increased by 0.1 percent to Php 5.114 trillion from the Php 5.110 trillion posted a month earlier. The banks’ gross NPLs, meanwhile, increased by 3.1 percent to Php 97.08 billion in July from the Php 94.12 billion recorded in June this year.

Aside from keeping NPL levels low, U/KBs continued to allocate substantial reserves for potential credit losses. At end-July this year, the industry provisioned for 140.15 percent of its gross NPLs. The figure, however, is lower than the 143.35 percent NPL coverage ratio registered a month earlier.

The industry’s gross NPLs also remained manageable across economic sectors as seen in financial and insurance activities; real estate; manufacturing; wholesale and retail trade; and electricity, gas, steam and air-conditioning supply, which represented 68.6 percent of U/KBs’ TLP in July this year.

The latest NPL figures indicate U/KBs’ continued adherence to high credit underwriting standards. The Bangko Sentral ng Pilipinas (BSP) monitors the loan quality of the U/KB industry in line with its supervisory efforts to foster sound credit risk management in the banking system. This is essential to the BSP’s policy objective of promoting financial stability.

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