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KB's NPL Ratio Improved as of August 2003

10.06.2003

The industry’s Non-Performing Loans (NPL) ratio improved in August 2003 by 0.42 percentage point to 14.96 percent from 15.38 percent in July 2003. NPLs declined by 3.32 percent from P256.80 billion last month to P248.27 billion. At least P7.99 billion of the reduction was due to take outs/financial restructuring of industry bad loans.

However, the potential improvement in NPL ratio was limited by the continued contraction of lending activity. NPL ratio, net of Interbank Loans (IBL), went down to 17.45 percent from last month’s 17.97 percent and a year ago’s 20.19 percent as Total Loan Portfolio (TLP), net of IBL, dropped by 0.44 percent to P1,423.05 billion from last month.

The industry continued to foreclose on collaterals in settlement of delinquent loans.  Real and Other Properties Owned or Acquired (ROPOA) rose by 1.56 percent to P196.38 billion. As the 3.32 percent reduction in NPLs outmatched the marginal increase in ROPOAs, the industry still managed to improve its overall asset quality. Non-Performing Assets (NPA) declined by 1.33 percent to P439.45 billion from last month’s P445.37 billion. Hence, NPA ratio decreased to 13.32 percent from 13.61 percent last month and from 14.56 percent a year ago.

Likewise, NPA coverage ratio declined to 31.72 percent from 32.57 percent last month and 32.27 percent a year ago as NPA reserves (LLRs plus provision for ROPOA) went down by 3.91 percent to P139.37 billion.  This was traced to the 4.31 percent decrease in Loan Loss Reserves (LLR) to P126.12 billion from P131.80 billion last month. NPL coverage ratio stood at 50.80 percent (vs. 51.33 percent last month).

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