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U/KBs' NPL Ratio Remains Low Amid a Rise in Loans

01.07.2016

The gross non-performing loans (NPLs) of universal and commercial banks (U/KBs) represented 1.82 percent of their total loan portfolio (TLP) at end-September this year.

The U/KBs’ NPL ratio slightly improved from the 1.86 percent posted at end-August this year amid a month-on-month decline in gross NPLs and an expansion in TLP. Said loan quality indicator has been below two percent since November 2014.

The banks’ gross NPLs of Php 95.24 billion in September went down from the Php 97.05 billion reported a month earlier. Meanwhile, the U/KBs’ TLP expanded to Php 5.24 trillion in September from the Php 5.21 trillion registered in August this year.

Aside from keeping the NPL ratio low, the U/KBs continue to set aside substantial reserves as buffer for potential credit losses. At end-September this year, the industry provisioned for 139.74 percent of its gross NPLs. The NPL coverage ratio stood at 141.19 percent a month earlier.

The U/KBs’ 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 accounted for 69 percent of the banks’ TLP in September this year.

The latest NPL figures indicate U/KBs’ continued adherence to high credit standards. The Bangko Sentral ng Pilipinas (BSP) monitors loan quality indicators as part of its supervisory efforts to promote sound credit risk management in the banking system.  This is essential to financial stability, which is a key policy objective of the BSP.

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