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Update on NPLs of Thrift Banks as of September 2002


The Non-Performing Loans (NPL) ratio of the TB industry improved to 13.37 percent from 13.50 percent last month. NPL level fell by 0.26 percent or by P0.05 billion from last month’s P20.61 billion to P20.56 billion. The improvement was due to the re-definition of NPLs as defined under BSP Circular No. 351*. Without the redefinition, the NPL ratio would have been 13.85 percent, higher by 0.35 percentage point from the previous month’s 13.50 percent.

NPL coverage (Loan Loss Reserves to NPL) trimmed down to 42.33 percent as against 47.08 percent a month ago mainly due to the 10.31 percent or P1.00 billion drop in LLR from P9.70 billion last month to P8.70 billion this month. The large decline in LLR reflected the paralleled downward adjustment in loan loss reserves as a result of the re-definition. Sans the re-definition, LLR level would have been higher at P9.56 billion and NPL coverage would have been wider at 44.65 percent.

Gross restructured loans (RL) to TLP ratio tapered off to 2.52 percent this period from 2.57 percent last month as the 0.58 percent cut down in RL complemented the 1.34 percent loan growth. This month’s ratio was also lower compared to the 2.79 percent ratio a year ago

The Non-Performing Assets (NPA) ratio [NPLs + ROPOA (Real and Other Properties Owned or Acquired) to gross assets] climbed to 18.19 percent from 17.82 percent last month as the 3.50 percent Gross Asset (GA) expansion was outpaced by the 5.63 percent hike in NPAs (brought about mainly by the 10.23 percent increase in ROPOA). NPA ratio, however, would have been higher at 18.45 percent under the old NPL definition. Nevertheless, NPA ratio both under the old and new circular showed a deterioration of overall asset quality.

NPA coverage ratio (LLR + provisions for ROPOA to NPA) slid to 19.61 percent from 22.65 percent last month due to the 8.55 percent drop in reserves, which accompanied the 5.63 percent hike in NPAs. The exclusion of the P0.86 billon (per Cir. No. 351) loan loss reserves mainly accounted for the P0.91 billion NPA reserves reduction. Thus, NPA coverage ratio would be higher at 20.98 percent under Cir. No. 202.


* The Monetary Board, in its Resolution No. 1277 dated 5 September 2002, approved the exclusion from NPL, loans classified as “Loss” in the latest BSP examination which are fully covered by allowance for probable losses; provided, that the bank has no unbooked valuation reserves and other capital adjustments required by the BSP and that such loans shall also be deducted from TLP for purposes of computation. This was implemented through BSP Circular No. 351 that took effect on 19 September 2002.

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